Amid Court Battle Over Capital Gains Tax, House Finance Chair Previews Future Reforms

State Rep. Noel Frame (D-36)
State Rep. Noel Frame (D-36)

By Clara Coyote

Following up on last year’s capital gains tax—a major legislative win for progressives during the 2021 session that puts a 7 percent tax on profits greater than $250,000 from the sales of assets, such as stocks and bonds—state Rep. Noel Frame (D-36) has her eye on comprehensive structural change for Washington’s upside-down tax code. The poorest fifth of Washington state residents pay, on average, 16.8 percent of their incomes in state and local taxes while the richest 1 percent of Washingtonians pay an average of just 2.4 percent.

A key piece of that larger agenda for Frame, the House finance chair, is a wealth tax; she introduced a version last year,  HB 1406, which the state department of revenue estimated would bring in $2.5 billion a year. Frame passed the bill out of her Finance Committee last year before it stalled in House Appropriations. Frame said she sees the senate version, SB 5426, as this year’s vehicle, and hopes the Senate Ways and Means Committee will hold a hearing on the legislation. 

Additionally, Rep. Frame said there will be smaller but meaningful bills during this year’s short (60-day) legislative session to clarify the implementation of existing legislation—for example, refining the 2023 rollout of the Working Families Tax Credit, a program Democrats passed last year, that will provide payments ranging from $300 to $1,200 to low-to-moderate-income people. Frame’s committee may also consider progressive modifications to the existing estate tax, by lowering taxes on small and medium estates while increasing taxes on the largest. This is work that first began with HB 1465, introduced (but not passed) last year.

Frame said that larger, systemic reform is emerge from the work of the multi-year bipartisan Tax Structure Work Group, which Frame chairs. Frame told PubliCola that she hopes to see bills as soon as 2023 refining an anti-displacement property tax exemption proposal meant to protect housing for mid-to-low income Washingtonians. In its final draft, Frame said, the legislation will incorporate feedback from town hall meetings where participants said renters as well as homeowners should benefit from the exemption. Frame said the work group will also figure out the details of her proposed wealth tax. 

Frame believes small businesses also need help. “We have the business and occupation (B&O) tax passed in the 1930s as a temporary measure that never went away,” Frame said. The B&O tax applies to all revenues a business takes in, regardless of whether a business turns a profit. “This disproportionately harms small businesses,” Frame said. “A central goal of the working group is finding a better alternative.”

Frame said she’s well aware that the progressive capital gains tax is already facing a court challenge but said she’s undeterred about moving forward with additional reforms that could draw more lawsuits. “Just because the rich and the powerful will threaten us every single time with a lawsuit doesn’t mean we shouldn’t ask them to pay their fair share,” she said. 

8 thoughts on “Amid Court Battle Over Capital Gains Tax, House Finance Chair Previews Future Reforms”

  1. the capital gains tax applies to the sale of businesses both large no small. the family owned exemption is very narrow. i love how they try to sell this as a sale on things like stocks and bonds but leave out the fact that the sale of small businesses are taxed too.

    1. We have been hearing that for years, that family farms and businesses have had to be sold to cover the taxes due. It’s never been that case. Does the proposed tax in Washington “lowering taxes on small and medium estates while increasing taxes on the largest” do anything different? How are “small/medium/large” defined?

      1. Paulbeard: I hope we get to live under your preferred system some day. It has been so successful in Argentina, Venezuela, Cuba (Socialism) and Zimbabwe, Uganda, Somalia (Kleptocracy). I am sure it works in some imaginary northern European country though. After politicians have stolen all the value and wasted it on their associates and those on a bad plan, maybe that will incentivize people to work smarter and have a better plan next time. At least that is how it works in the fantasies of Progressives. The problem is that you will never learn from your bad ideas. You will only blame your problems on capitalism, global warming, Donald Trump, etc. By the way, the president you voted for is a senile fool. Name one thing he has done correctly. Keep writing though. I am always entertained by stupidity. Steve Willie.

  2. If anyone has Frame on speed dial, send her this link…

    King County tax assessor mentioned a few weeks back that Idaho’s budget surplus is due to an income tax…it looks like there may be more to it than that.

    If Frame or any other legislators are serious about getting rid of the B&O tax and taxing those who have gamed the system for wealth, there is a solution, one that the Uniformity Clause was probably written to prevent. Washington’s voters need to decide if a 1930s stopgap has run its course and tax wealth without taxing productivity. The solution is here -> if you’d rather not slog through the 1979 version (he was no prose stylist, for all his other gifts).

  3. Noel Frame is an idiot. Her expertise is limited to political organizing. She knows very little about economics, technology, business, or anything useful. She is qualified to be a socialist. Her proposed legislation contains numerous loop-holes, which will require several rounds of additional legislation to fix. She proposes to extract value from the productive class… those in software, aircraft, contracting, and farming for example, then waste half of it (like socialists always do), and distribute the rest to those on a bad plan to buy more votes. Rich people can easily move, or fake a move, or play accounting games, which they will if this legislation passes. I hope it passes, so Washington State can become just like Venezuela, Argentina, Cuba, Free-attle, etc. That will be fun to watch, and the smart people can move to Idaho or Texas just like many of them already have. Steve Willie.

    1. Ah, Steve. Even after your Free-attle narrative was disproven you still can’t help but beat that long dead goat and swear it is a horse.

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