Despite furious challenges from GOP, and even some Democratic legislators, the House and Senate in Olympia over the weekend passed a capital gains tax.

The legislature adjourned Sunday, the session is now over.

The 7% tax applies to sales or profits of over $250K; and now will likely face legal challenges.

GOP Senator Brad Hawkins (who represents parts of Chelan, Okanogan and Grant Counties) had this comment about the passage:

“If passage of a new capital gains income tax at a time when Washington has a $2 billion budget reserve and revenues are surprisingly strong isn’t bad enough, tax supporters were successful in removing any opportunity for a citizen referendum by inserting an ‘emergency clause’ into the bill enabling it to go into effect immediately upon the governor’s signature."

The bill, once signed by Gov. Inslee, will indeed go into effect immediately. Democrats also squeezed in an amendment that any challenge from citizens will have to come by way of a Referendum, as opposed to an Initiative. Referendums are harder, more complicated, and require more signatures.

The tax is unconstitutional, and will likely face a legal challenge. That's because even the IRS regards capital gains as income, therefore it's an income tax--which violates the state Constitution.

Many legislators believe the tax was actually a precursor to an effort to implement an actual income tax. Once expected legal challenges are made, it will likely end up before the State Supreme Court. Then they're expected to side with the Democrats and say capital gains are NOT an income tax. This would pave the way for legislators to push for an actual such tax.

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The tax will impose a 7% tax on the sale of stocks, bonds, and other high dollar assets exceeding $250K, and will applied to both single persons and couples.

Gov. Inslee had defended it, claiming it would only affect  "a few hundred" people in our state. But it's ripple effect is far beyond that. There are a lot more people who deal in these high-end transactions. For example, if a business owner sells their firm to someone else, they'd face it too. And, as mentioned earlier, it's unconstitutional.

These kinds of taxes have significant effects on investing, development, and other economic growth. People are less likely to invest in business, industry and other parts of the economy when there a capital gains tax in place.

The Democrats spinning a capital gains tax is reminiscent of Supreme Court Justice John Roberts deciding vote on Obamacare, claiming it was a tax, and not an illegal forced contract placed on the American people. Playing schematics and with words, not the truth.

 

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