This measure would repeal an excise tax imposed on the sale or exchange of certain long-term capital assets by individuals who have annual capital gains of over $250,000.
Results
Choice
Votes
%
✔ Yes
1,364,510
35.89%
✖ No
2,437,419
64.11%
Valid votes
3,801,929
100.00%
Invalid or blank votes
0
0.00%
Total votes
3,801,929
100.00%
Yes
50–60%
No
70–80%
60–70%
50–60%
Initiative No. 2109 (I-2109) was a ballot initiative in the U.S. State of Washington that appeared on the ballot on November 5, 2024. The initiative was brought to the state legislature by Let's Go Washington, a Redmond-based political action committee founded by businessman and hedge-fund manager Brian Heywood.[1][2] The initiative would have repeal SB 5096, which created a 7% capital gains tax on the sale of long-term capital assets (i.e. stocks, bonds and business interests) worth more than $250,000 in Washington state since 2021. Real estate sales are already exempt from the tax.[1][3]
The effort to repeal I-2109 began in 2023, following a ruling of the Washington Supreme Court upholding the constitutionality of the capital gains tax.[2][4] I-2109 collected a total of 436,474 signatures, and was ultimately certified and introduced to the legislature for their 2024 legislative session.[5] Senate majority leader Andy Billig (D) and Speaker of the House Laurie Jenkins (D) announced on February 16, 2024 that the state legislature would not hold hearings on the initiative.[6] This decision not to take action on the referred initiative placed the decision on the question to the November 5, 2024 election.
Background
The genesis for what eventually became the capital gains tax was proposed in the budget presented by Gov. Jay Inslee on December 17, 2020. The 2021 budget proposal included a proposed 9% tax on capital gains, something Democrats in the state legislature had sought to pass in previous years but has lacked the votes to pass.[7] The proposed tax was first introduced into the state Senate, with a first reading and referral to the Ways & Means committee occurring on January 11th, 2021.[8] The revised proposal was passed from the committee on February 16th, and then passed the rules committee two days later.[8] The revised tax proposal, which reduced the tax rate from 9% to 7%, passed the Senate on March 6th after what the Seattle Times described as a "fierce debate" by a vote of 25-24.[8][9] The legislation was given a first reading in the House on March 9th, passing out of the Finance committee on April 16th and passing the state legislature on April 21st by a vote of 52-46.[8][10] At that time, the legislature removed language from the bill that would have referred the capital gains tax bill to the voters as a referendum.[10]
Governor Jay Inslee signed SB 5096 into law on May 4th, 2021,and the capital gains tax became effective on July 25th, 2021.[8][11] However, before the law had been signed, a group of seven state residents, working with a Seattle law firm and the conservative think tank, the Freedom Foundation, filed a law suit in the Douglas County Superior Court claiming that the capital gains tax constituted an illegal income tax.[12] A second lawsuit was filed on May 20th, 2021 by former Attorney GeneralRob McKenna, also in Douglas County Superior Court.[13] The two cases were consolidated and, on March 2nd, 2022, Douglas County Superior Court Judge Brian Huber sided with the plaintiffs and struck down the capital gains tax as an illegal income tax.[14] On appeal, the state Supreme Court overturned the district court ruling in a 7–2 decision, upholding the constitutionality of the capital gains tax as an excise tax.[15] On January 24, 2024, the US Supreme Court declined to hear an appeal of the state Supreme Court decision.[16]
The libertarian-leaning hedge fund manager Brian Heywood spearheaded a second effort to remove the capital gains tax by initiative, founding and bankrolling the Let's Go Washington PAC to coordinate the gathering of signatures after failing to qualify any initiatives related to the capital gains tax in 2022 on a volunteer basis.[2][17] The capital gains tax repeal initiative, along with five other initiative efforts, submitted their signatures to the Secretary of State in December of 2023 as initiatives to the legislature.[18][19][20] The Secretary of State's office certified that a sufficient number of signatures had been gathered on January 23, 2024, which referred the issue to the state legislature.[21] On January 24th, I-2109 was introduced to the House (referred to the Finance committee) and the Senate (referred to the Ways & Means committee), but no subsequent action was taken on the initiative by those committees.[22] Rep. Jim Walsh (R) was the sponsor for the bill in the legislature.[23] Democratic leaders told reporters in February that the state legislature would not be moving forward with I-2109, putting the initiative on track for a public vote on November 5th, 2024.[23][24]
Language and impact
I-2109 placed the following question before the citizens of Washington:
Initiative Measure No. 2109 concerns taxes.
This measure would repeal an excise tax imposed on the sale or exchange of certain long-term capital assets by individuals who have annual capital gains of over $250,000.
Should this measure be enacted into law? Yes [ ] No [ ]
In 2023, the first full year of implementation for SB 5096, the tax brought in $786 million in new revenues to the state, though as of May 15th, 2024 the tax is estimated to have brought in $433 million for 2024.[25] The majority of the money brought in under the capital gains tax comes from King County, with about 84% of all net payments coming from King County residents.[26] The tax has been paid by a total of 3,354 individuals, with the top 10 tax payers comprising 56% of the total amount of taxes paid to date.[26] The state Office of Financial Management estimates that a repeal of SB 5096 would cut about $833 million dollars in anticipated tax revenues from the projected 2025 budget.[27] Supporters and opponents of I-2109 have clashed over whether a 2022 law covering the impact initiatives could have on the state budget applied to this initiative, though the state Supreme Court ruled in August that the law permitted disclosure of budget impacts in the official explanations of the initiative in the November voter's guide.[28][29]
Support for I-2109
As of September 17, 2024, Let's Go Washington[30] and the Taxpayers Accountability Alliance were registered as sponsors of the initiative.[31] Additionally, the Association of Washington Businesses has endorsed I-2109.[32] Representative Jim Walsh (R), the current chair of the Republican Party of Washington, is also a supporter of I-2109.[4][33] Furthermore, the Washington Bankers Association supported the initiative.[1]
Opposition to I-2109
As of September 17, 2024, the No on 2109 Committee, Stop Greed PAC, the SEIU 775 Ballot Fund, Protect Washington, Fuse Voters, and the 45th District Democrats were registered as opponents of the initiative.[31][34] Additionally, the progressive-aligned Invest in Washington Now PAC had been vocal in their opposition to I-2109, as has the Children's Alliance.[4][35] Opposition to the initiative also came from the Washington Progress Fund, Moms Rising Together and the League of Women Voters of Washington.[3] Various labor and community orgaizations also supported a “No” vote, including the National Education Association and the Washington Federation of State Employees. [1]
