(The Center Square) – Washington state’s capital gains tax has brought in almost $890 million in its first year, exceeding initial expectations of bringing in at least $500 million annually for early childhood education programs.
The state Department of Revenue reports 3,765 returns filed, with total payments of more than $943 million received and more than $33 million in refunds issued to date. Nearly $21 million in estimated outstanding credits/refunds remain, according to the DOR.
That translates into an estimated net total of more than $889 million in capital gains tax revenue for the state.
Mikhail Carpenter, DOR communications manager, provided some background on capital gains tax payments.
“The extended deadline for capital gains excise tax filers was October 16,” he explained in an email to The Center Square. “Taxpayers who were granted an extension in April had to submit their return by that date. Taxpayers who were granted an extension had until October 16 to file their return but had to make an estimated payment by the April deadline.”
Carpenter went on to say, “Because the payments were estimated some taxpayers will have overpaid and be due refunds while others may owe more. We won’t have a final collection figure until all those extended returns are processed.”
He doesn’t expect the final collection figure to differ that much from current estimates.
“Our capital gains team is still processing returns from the extended deadline in October,” Carpenter noted. “While that work is ongoing, we have some preliminary numbers. These numbers will be updated before session, but we don’t expect much fluctuation.”
The Center Square asked about any potential impact on capital gains tax revenue regarding billionaire Amazon founder Jeff Bezos’ announcement that he plans to leave Seattle for Miami.
In January 2022, Washington implemented a 7% tax on the sale of financial assets despite a legal challenge. Earlier this year, the state Supreme Court upheld the constitutionality of the capital gains tax.
The planned move could benefit Bezos financially if he sells Amazon shares, since Florida, unlike Washington, does not have a capital gains tax.
“Taxpayer confidentiality prevents us from speaking about an individual taxpayer’s situation or impact,” Carpenter said.
In March 2022, Douglas County Superior Court Judge Brian Huber ruled the tax was “properly characterized as an income tax … rather than as an excise tax as argued by the State” and struck it down. The state constitution’s uniformity clause does not allow income to be taxed at different rates.
State Attorney General Bob Ferguson directly appealed the decision to the Supreme Court, which in July of that year agreed to hear the case.
In November 2022, the Supreme Court allowed the state Department of Revenue to begin collecting the tax while it considered the state’s appeal.
In March, the state’s highest court ruled the tax passed constitutional muster.
Prior to the capital gains tax being implemented last year, Bezos sold over $8.8 billion worth of Amazon stock in 2021, according to Forbes. That would have raked in $616 million in capital gains tax revenue.
“The first $500 million goes to the education legacy trust account,” Carpenter said. “Any remainder collected is deposited into the common school construction account.”