Capital gains tax targets the wealthiest

1. Maintain or Increase the Capital Gains Tax On April 25, 2021, the Washington legislature passed Senate Bill 5096, which imposes a 7% tax on capital gains of more than $250,000.174 According to State Representative Noel Frame, the intent of the bill is for “the wealthy to pay their fair share.” 175 Beginning in 2023, the law is expected to raise $550 million annually, and the bill exempts a wide range of assets from taxation (like retirement accounts, real estate, livestock, timber, and certain agricultural lands).176 Of course, the law is not without opposition. Within days of the bill’s passage, a lawsuit was filed against the State, alleging that the law imposes an income tax, and thus violates the state constitution, specifically Article VII, Section 1 of the Washington constitution, which requires all taxes to be “uniform upon the same class of property.177 On March 2, 2022, Douglas County Superior Court Judge Brian Huber agreed and overturned the capital gains tax on the basis that the tax 172 DAVIS ET AL., supra note 13. 173 WASH. STATE BUDGET & POL’Y CTR., supra note 15, at 16 (capital gains are profits from the sales of corporate stocks, bonds, real estate investments, and other financial assets.). 174 Joseph O’Sullivan, Washington House Approves New Tax on Capital Gains as Fight Brews Over a Referendum, SEATTLE TIMES (Apr. 21, 2021, 5:11 PM), https://www.seattletimes.com/seattle-news/politics/washington-house-approves-new-taxon-capital-gains-as-fight-brews-over-a-referendum/ [https://perma.cc/A7A6-WGR7]. 175 Id. 176 Id. 177 Id.; WASH. CONST. art. VII, § 1. 114 SEATTLE JOURNAL FOR SOCIAL JUSTICE SEATTLE JOURNAL FOR SOCIAL JUSTICE violated Article VII, Section 1 of the Washington constitution.178 Washington Attorney General Bob Ferguson announced that his office would appeal to the Washington Supreme Court as “[t]here’s a great deal at stake in this case, including funding for early learning, child care programs, and school construction.” 179 Similarly, President Biden’s proposed imposition of taxes on unrealized capital gains could also face legal challenges from opponents as it is unknown whether taxes on unrealized capital gains are different from income taxes allowed by the Sixteenth Amendment. 180 Attorney General Ferguson’s appeal is pending before the Washington Supreme Court, and oral arguments before the Court are expected in January 2023. 181 Proponents of the tax say that it is not an income tax, but instead a “sales tax that only is collected when a sufficient amount of stock is sold.”182 Additionally, following the November 2021 General Election in Washington State, state Advisory Vote No. 37—which concerns the new capital gains tax—was rejected by over 60% of Washington voters.183 Note, 178 Judge Overturns Washington State’s New Capital Gains Tax, KING 5 NEWS (Mar. 2, 2022, 7:22 AM), https://www.king5.com/article/news/politics/state-politics/overturnswashington-states-capital-gains-tax/281-41326c01-0ad3-49bf-8dac-5bf3374f881b [https://perma.cc/Z3QE-235G]. 179 Id. 180 Rappeport, supra note 30. 181 David Gutman, Washington Supreme Court to Hear Challenge to New Capital Gains Tax, Bypassing Court of Appeals, SEATTLE TIMES (July 13, 2022, 2:07 PM), https://www.seattletimes.com/seattle-news/politics/washington-supreme-court-to-hearchallenge-to-new-capital-gains-tax-bypassing-court-of-appeals/ [https://perma.cc/PJE9- 4T2Y]; Taylor Soper, Washington State Capital Gains Tax Can Move Forward with Supreme Court Case Pending, GEEKWIRE (Nov. 30, 2022, 6:36 PM), . https://www.geekwire.com/2022/washington-state-capital-gains-tax-can-move-forwardwith-lawsuit-pending/ [https://perma.cc/29WR-J6Q4]. 182 Mike Lewis, Signature Shortage: The Future of Washington State’s Capital Gains Tax is in the Hands of State Supreme Court, GEEKWIRE (July 12, 2022, 4:46 PM), https://www.geekwire.com/2022/signature-shortage-the-future-washington-states-capitalgains-tax-in-the-hands-of-the-courts/ [https://perma.cc/6M6R-3X3W]. 183 November 2, 2021, General Election Results: Advisory Vote No. 37, OFF. SEC’Y OF STATE (Nov. 23, 2021, 4:07 PM), https://results.vote.wa.gov/results/20211102/advisoryvote-no-37.html [https://perma.cc/5A3K-Y9EM]. Critical Tax Theory: Combatting Racial and Income Inequality in America 115 VOLUME 21 • ISSUE 1 • 2022 however, that advisory votes are nonbinding in Washington. 184 This public sentiment may be indicative of either the public’s strong opposition to tax increases on the rich or its ignorance of the true intent of the tax (or both). Ultimately, a capital gains tax would impact the wealthiest in Washington State, the top 1%, with little to no impact on low- and middle-income families. 185 Like the increased revenue from higher federal taxation on high-income groups, the increased revenue from Washington’s capital gains tax would be used to provide more resources for schools, early learning programs, and other investments that could create greater opportunities for people of color.186