Washington state voters reject initiatives that aimed to repeal capital gains tax and climate program
Washington state voters rejected initiatives that would have axed a capital gains tax and a program to reduce carbon emissions.
More than 63% of residents voted “no” on Initiative 2109, which would have struck down the state’s capital gains tax, with 58% of votes counted, as of 9:17 p.m. PT on Tuesday. The Associated Press called the race at 8:43 p.m.
Nearly 62% voted against Initiative 2117, a measure to eliminate a program requiring the state’s largest polluters to pay for greenhouse gas emission permits, with 58% of votes counted, as of 9:17 p.m. PT on Tuesday. The Associated Press called the race at 8:46 p.m.
“Washingtonians said loud and clear that they value clean air and clean water — and they don’t want to go backwards. Washingtonians showed that they reject cynicism, and they support action and innovation to protect our kids’ and grandkids’ health. This a victory for clean air, clean energy jobs, and a stronger economy in the Evergreen State,” said Gov. Jay Inslee, in a statement.
The campaign opposing I-2117 built a coalition of 500 organizations that included Washington tech giants Microsoft and Amazon, as well bp America REI, climate tech businesses, labor interests and 17 of the state’s federally-recognized Tribal Nations.
Supporters of the initiative include trade groups such as the Building Industry Association of Washington, Washington Retail Association, Association of General Contractors of Washington, National Federation of Independent Business and others.
I-2109 proponents include many of the same organizations behind the climate initiative, plus the Association of Washington Business.
The state’s capital gains tax, which has raised $1.2 billion over two years, pays for public education, early learning programs and school construction. The Office of Financial Management estimated that if voters had repealed the 7% tax, the state would lose $2.2 billion in revenue over the next five years.
Opponents to the measure include the National Education Association, the Washington Federation of State Employees, SEIU Initiative Fund, the Washington Education Association and others.
“Washingtonians have spoken loud and clear for progress toward fixing our upside-down tax code, as the middle class pay three times their income in taxes as the wealthiest Washingtonians. Thanks to the capital gains tax, we have gone from 50th to 49th most regressive tax code in the nation. Tonight voters said, let’s continue going forward, not back,” said Stephan Blanford, executive director of Children’s Alliance, in a statement.
Washington’s climate efforts
I-2117 would have scuttled the cap-and-invest carbon market created by the state’s Climate Commitment Act, which was passed by lawmakers three years ago and went into effect in January 2023.
The program has raised billions of dollars that pay for climate efforts including initiatives in communities and tribes hardest hit by the impacts of climate change, state transportation infrastructure projects, and support for job creation and climate tech companies working on decarbonization.
The initiative would have additionally prohibited state leaders from creating similar programs in the future.
Backers of the initiative call the program a hidden gas tax and blame it for the state’s higher-than-average prices at the pump. They said the carbon market is not reducing climate-warming emissions and its impacts are unaffordable for many Washington residents.
Washington’s tax landscape
The capital gains tax was approved by lawmakers three years ago. It applies to profits from the liquidation of stocks and bonds that exceed a certain level, which was $262,000 for the 2023 tax year and adjusts with inflation. This spring, some 3,850 people filed returns associated with their capital gains, though not all would have owed the tax, according to the state Department of Revenue.
Tax opponents said that it harms small businesses and innovation and is detrimental to the region’s tech economy. They point to budget surpluses at the state level in recent years and accuse lawmakers of squandering tax dollars.
Washington is one of 42 states with a capital gains tax. It relies primarily on business and occupation (B&O) taxes, property, sales and other state taxes for most of its revenue. Washington is one of nine states that does not have a state income tax and it also lacks a corporate income tax. A new report from the nonprofit Washington Research Council said that B&O taxes are becoming increasingly burdensome in the state.
Washington’s capital gains tax does not apply to real estate and home sales, retirement and college savings accounts, farms and family-owned small businesses.
Opponents to the tax challenged it in court, arguing that it functioned as an income tax and was therefore banned by state law. The Washington state Supreme Court upheld the tax in a 7-2 decision last year, and the U.S. Supreme Court declined to hear an appeal of the ruling.
Campaign cash
Initiatives 2117 and 2109 were spearhead by Seattle-area hedge fund manager Brian Heywood and the Let’s Go Washington campaign. Heywood sponsored two additional measures as well: I-2066, which aimed to prohibit state and local governments from restricting access to natural gas, and I-2124, which would allow people to opt out of a tax that provides long-term care.
I-2066 had 51.2% of the “yes” vote as of 9:07 p.m. I-2124 had 55.5% against it.
Heywood offered a response Tuesday evening regarding the vote counts.
“These numbers tonight are not what we would have wanted to see, but they do not mean defeat,” he said in a statement.
“We have already won because the people in this state know they can mobilize to hold their government accountable. We are proud of every single volunteer, supporter, and voter who believed that it was time to fix what’s broken,” he added. “There is clearly still work to do, but this legislature should know that they cannot continue to act outside of the will of the people without being held accountable for their actions.”
Let’s Go Washington raised $9.5 million for the four ballot measures.
The No on I-2117 campaign brought in $16.4 million, while No on I-2109 raised $4.4 million.
Editor’s note: Story updated Nov. 6 to add comments on the vote outcomes.