WA Capital Gains Tax Revenue Continues to Free-Fall

WA state's capital gains tax continues to plummet when it comes to revenue.

  WA State sees only $433 million in 2024

A capital gains tax is what is paid on the sale of large wealth items, such as stocks, boats, and even very expensive vehicles. Most such taxes usually have a high threshold, for example, selling a boat for $7,000 wouldn't affect you. You pay a tax on the amount you profited from the sale, if it's above a certain level.

It does NOT affect the sale of real estate.

In WA, however, the tax is forbidden by the State Constitution. A lawsuit was filed after the tax was pushed through by Democrats in the legislature and it ended with the State Supreme Court basically calling it an "excise" or transaction tax--which it is not. Capital gains are considered income, even by the IRS, and income taxes are prohibited by the WA Constitution. We are the only place in the US, even the planet, that calls capital gains tax an excise tax.

The tax was often jokingly referred to as the "Jeff Bezos" tax, the founder of Amazon who used to call WA State his home. However, he relocated to Florida and has saved himself nearly $1 billion dollars in doing so.

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In the first year of the tax, many residents 'overpaid' because of confusion with the tax, and they didn't want to underpay.  It brought in $786 million. However, in 2024, that number dropped to $433 million, and it's expected to drop again in 2025 as wealthy residents continue to move out of state.

The money is supposed to go to education. According to the Tri-City Area Journal of Business, in Benton County in 2023, 28 persons paid about $7.8 million in capital gains. But in 2024, that number dropped to 13 persons, who paid $1.7.  The TCAJOB says Franklin County did not have any capital gains taxpayers.

The drop in Benton County taxpayers reflects a state-wide movement in which many wealthy or higher-income persons are moving out of state, especially to places that do not have an income or capital gains tax.