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April 23, 2021

Dear Friends and Neighbors,

The 2021 legislative session is set to wind up this Sunday, but the final few days will be very busy with multiple tax bills still in play that could change our state forever. We just finished debating one of those bills Wednesday, an income tax on capital gains.

Despite an abundance of state tax collections that put our revenue at pre-pandemic levels; despite billions of additional dollars of federal COVID-19 aid; despite voters having rejected it 10 times already; and despite objections from five Democrats in the House, 52 members from the majority party chose to pass a capital gains income tax.

Senate Bill 5096 passed out of the Senate 25-24 on March 6; our Sen. Randall voted for it. Yet, it didn't come to the House floor until April 20. The debate was spread out over two days, with the vote on final passage coming on April 21. Republicans offered 19 amendments, including one from me that sought to protect married couples. All these amendments would have improved the bill, but after four hours of debate the first day, only one was adopted.

My amendment would have removed the marriage penalty that limited those who are married to only half of the normal deduction. Under the bill, as an individual you would get a $250,000 deduction, unless you are married.  As a married couple you only get the $250,000 combined, or $125,000 each.  This makes no sense to tax married individuals more and I wasn't alone in believing this is good policy. All Republicans and four Democrats voted to support this amendment, but it was not enough to pass it.

This targeting of taxation toward middle- and working-class individuals completely betrays the narrative that the tax will only focus on the mega wealthy. Here are a few more important points I made during my speech about this amendment:

1. People need to watch what we say, not what we do.
   1. The majority party is being hypocritical with their rhetoric (we will only tax the rich) vs. their actions (we will tax retired married couples and other middle-income folks).
2. The definition of the marriage penalty – In computing tax, there may be deducted from the measure of tax: (1) A standard deduction of $250,000 per individual, or in the case of spouses or domestic partners, their combined standard deduction is limited to $250,000, regardless of whether they file joint or separate returns.
3. The new version of this bill, which was adopted late in the bill process, is inconsistent with all other versions of this bill and all of the talking points used to justify and sell it to the public by its proponents.
4. People will see this for what it is, a bait and switch.
   • That is, the majority party
     • says it will tax the rich but bury into the details a tax that hits the middle class and low income.
     • says that it will be anti-regressive, then adopt very regressive amendments to the bill at the very last minute.
   • Furthermore, if the proponents are willing to change directions in this last-minute fashion, how long will it take for the super-rich to lobby for the very loopholes that allow them to avoid all federal income taxes?
     • There is a reason that the major corporate elite like Jeff Bezos of Amazon, Warren Buffet, and Bill Gates all pay virtually no federal taxes!
     • That is why this state has rejected similar proposals:
       • 10 times at the ballot, and
       • Four times by the Supreme Court, and once by an appeals court, which the Supreme Court upheld.

Here's a detailed history of both:

1. The money being taxed here is NOT Bill Gates or Jeff Bezos type money
   • It is retiree money that is significant to those on a fixed income who may have to sell an asset to pay for:
     • Medical care – especially in a COVID season when costs have risen, and such care is increasingly important.
     • Pharmaceutical drugs and medicines.
     • Their mortgages and ever-increasing property taxes so that they can stay in their home.
     • And provide for their extended family that may have an unexpected financial burden arise.
2. Final point:
   • We need to stand up for fixed-income families and retires, we need to not penalize marriage, and we need to make sure the bill does what the supporters said it was going to do in the first place.

The debate on final passage took an additional two hours, as more than two dozen Republicans explained why this income tax bill is bad for Washingtonians. You can watch my speech by clicking on the image below:

Because it was amended by the House, the bill now heads back to the Senate for that body's approval. If they concur with the changes from the House, the bill will be sent to the governor for final signature. As soon as it's signed, it will likely be challenged in the courts as unconstitutional, almost immediately.

This legislation is unwanted, unstable, unpopular, unfair, and it's regressive. It would hurt everyone in Washington and would likely be the vehicle to implement a statewide income tax in the near future. This decision by the governor and the majority party could end up costing Washingtonians severely.

If this bill does end up becoming law, hopefully voters will have an opportunity to voice their opinion just like they did the 10 previous times as outlined above.

Thank you for your support. I stand with you against this capital gains income tax, and any other type of unconstitutional tax on our income. Please continue to reach out to me by using the contact information below.

In strength and honor,

Sincerely,

Jesse Young