Last month, voters swept a wave of progressive leadership into the state legislature, setting the stage for a busy legislative session in the new year. Advocates across Washington are gearing up to champion policy solutions for key issues like housing and homelessness, mental healthcare, affordable higher education, and more.
But we can’t achieve this bold vision without addressing the elephant in the room: our upside-down tax code. It’s no longer a secret that Washington has the most upside-down, regressive tax code in the country, and it’s holding us back from investing in the things we need to thrive. The question now is what we should do about it. There are two great ideas on the table for 2019’s legislative session -- ending the tax break on capital gains and funding and modernizing the Working Families Tax Credit.
So what’s the deal with capital gains?
Washingtonians have been talking about closing the capital gains loophole for years -- we’re one of only nine states that doesn’t have a capital gains tax. Capital gains are profits from the sale of high-end financial assets like corporate stocks, bonds, and investment properties. Because these kind of assets are concentrated among the top 1% in our state, the tax would be paid almost exclusively by the wealthiest. It’s time for them to start chipping in -- low- and middle-income households have paid far more than their share for too long. Ending the tax break on capital gains would begin to balance our tax code and help us invest in thriving communities statewide.
Governor Inslee just proposed closing this gaping hole in our tax code by implementing a 9% capital gains tax. It would exempt retirement accounts and primary residences to ensure that only those who can most afford the tax would be subject to it.
What about the Working Families Tax Credit?
Ending the tax break on capital gains would provide new revenue to invest in solutions to help all of us thrive. Our opinion? Fund and expand the Working Families Tax Credit (WFTC)! The WFTC is Washington’s version of the federal Earned Income Tax Credit. It’s actually been on the books since 2008, but wasn’t funded due to a budget shortfall during the recession. In the ten years following, legislators have prioritized other projects -- but our terrible tax code has only gotten worse since then.
Many full time, low-wage workers in the United States don’t make enough to cover the basics, let alone put money aside for savings and emergencies. And thanks to a legacy of racist practices such as redlining, hiring discrimination and other customs that shape our lives, people of color represent a disproportionate share of those workers. The federal Earned Income Tax Credit lifts more working families out of poverty than almost any other government program. It gives low-wage workers a boost to their incomes through a tax credit, a little extra cash to help working people make ends meet or to keep on hand for emergencies. As it’s currently written the WFTC would match 10% of the federal credit.
We want to make the WFTC even better by updating it to serve more people who could benefit from it. One major update would expand eligibility to include low-income workers without children, low-income college students, caregivers, and immigrant workers who contribute to our economy, but don’t currently have U.S. citizenship. We can also maximize the impact of the credit by spacing it out over several months rather than paying it in one lump sum. Finally, we should update the maximum qualifying income eligibility for a single worker to $50,000 to reflect the high cost of living in our state. These common-sense improvements would move the WFTC into the modern era.
How can I get involved?
Start today by telling your legislators to clean up our tax code so it works for all of us.
Email your legislators HERE and tell them make our tax code work for all us!
The 2019 legislative session is sure to a busy one, so we’ll need all your help to pass these critical solutions. Keep an eye on our Facebook, website, and Twitter for action alerts -- your swift action makes all the difference. In the meantime, you can spread the word by talking to your friends, family, coworkers, and more! Chances are, you or people you know could live healthier, happier lives with the WFTC. As for closing the tax break on capital gains, we’re all better off when everyone chips in their share.
Our upside-down tax code sends a message: as a state, we’d rather give tax breaks to the rich and powerful than invest in the things that benefit all of us. But it doesn’t have to be this way. Ending the tax break on capital gains and funding a modernized Working Families Tax Credit would begin to balance our tax code so communities everywhere can thrive.