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It happened! By one vote, the Washington state Senate approved and sent it on to the state House.

It was so controversial that four Democrats actually voted against it. Because … well, that’s the question. Why is this so controversial?

This state has one of the most regressive tax systems in the United States. The idea of a capital gains tax is to even things out a little.

Critics oppose it as an income tax – but if it is, it’s the most peculiar income tax I’ve ever seen. Your salary could be a million dollars, or $5 million, or $10 million, and you wouldn’t pay a penny to the state under this tax.

But Dave, what about the capital gains? Well, I’ll give you a personal example.

I have a retirement fund. About a year ago, I bought a stock called SQ. Yesterday, I checked, and it’s up $14,000. I didn’t do a thing to earn that gain except to click my mouse on a “buy” button in 2019. If I cash it in, I’d pay around 15% to the IRS, but zero to Washington state, even under this recently-passed tax, because it only applies to gains over $250,000.

OK, but now suppose I was that guy who bought $5,000 worth of Microsoft in 1986 and held onto it. As of Friday, it would have been worth $15.8 million.

Under the capital gains tax, if I cashed it in, I’d pay about $1.1 million to the state, and I would still have $14,763,554.67. But wait – it’s my retirement fund, so under this bill, the whole thing is exempt and I keep it all!

And by not selling it, I keep collecting $140,000 a year in stock dividends without paying a penny to the state in income tax.

So, you can call this an income tax and oppose it as grossly unfair, … but just so you know, I don’t think a single stock holder will have to set up GoFundMe if this passes.

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