Olympia City Council opposes initiatives that would roll back long-term care, capital gains tax
The Olympia City Council voted unanimously to oppose two more state ballot initiatives on Tuesday, a week after taking a stand against two energy-related initiatives on the Nov. 5 ballot.
This time there was no council discussion and only two speakers on the initiatives during public comment before the council voted to opposed Initiatives 2109 and 2124, which would repeal a capital gains tax and make the state’s WA Cares long-term care program optional.
If passed, No. 2109 would prevent the state from imposing taxes on the sale or exchange of long-term capital assets. It would eliminate funding that currently goes to K-12 education, higher education, early learning, child care and school construction.
Assistant City Manager Debbie Sullivan said the capital gains tax was passed in 2021, and applies only to capital assets held for longer than a year, such as stocks, bonds, precious metals or artwork. She said it doesn’t apply to the sale of real estate, retirement savings accounts, deferred compensation accounts, or cattle, horses or breeding livestock, if more than 50% of the taxpayer’s income is from farming or ranching.
Sullivan said it also doesn’t apply to property that is depreciable or that is treated as an expense under identified federal state laws, nor timber or timberland, including sales of timber or timberland that result in dividends or distributions from real estate investment trusts, certain commercial fishing privileges and goodwill received from the qualifying sale of an auto dealership.
She said the tax allows an annual standard deduction of $250,000 for each taxpayer, which means that a tax applies only to taxpayers who make capital gains over $250,000 in any tax year. For spouses and domestic partners, the combined standard deduction is limited to $250,000, regardless of whether they filed joint or separate returns.
Sullivan said the tax rate is 7% for covered gains.
“So for example, if a person bought $150,000 worth of stock and sold it 10 years later for $500,000, they would have a net gain of $350,000,” she said. “The first $250,000 of that gain would be exempt from tax, and the taxpayer would owe 7% tax on the remaining $100,000 of gain for a total capital gains tax due of $7,000.”
The first $500 million collected from the capital gains tax each year is deposited into the education legacy trust account, which supports K-12 education, expands access to higher education, provides funding for early learning and child care programs.
Any amounts collected above $500 million are applied to the common school construction account, which funds the construction of facilities for common schools.
Public speaks out against I-2109
Yona Makowski said she’s in favor of the resolution to oppose I-2109. She said the capital gains tax essentially targets extraordinary profits from the sale of stocks and bonds.
“This capital gains tax, which exempts real estate and retirement accounts, makes our state tax code more equitable and provides critical funding to state programs,” she said. “Washington has an upside down tax code with the poorest paying the largest share of their income in taxes, while the wealthiest pay the least.”
Makowski said since the capital gains tax was passed, the state went from being the most regressive tax system in the country to the 49th.
She said Initiative 2109 will cut billions from K-12 education, higher education, school construction, early learning and child care, worsening the child care and school funding crises all over the state, including Olympia.
Jim Lazar said the capital gains tax initiative sets a new record of self-serving use of the initiative process.
He said the initiative process shouldn’t be used by a wealthy man — in this case, hedge fund operator Brian Heywood, who’s behind the four initiatives on this year’s ballot — to rewrite tax code to save himself money.
“I hope that ordinary voters will recognize that they are almost 100% unlikely to ever encounter this millionaire tax; it affects a tiny fraction of the people in the state of Washington, only a few thousand out of 7+ million,” Lazar said.
Explaining Initiative 2124
Debbie Sullivan said I-2124 would amend state law to provide employees and self-employed people the option to opt out of the state’s long-term care program, instead of it being mandatory.
Washington Cares, the state’s Long Term Care Insurance, provides people who meet its requirements up to $36,500 plus increases based on inflation to pay for certain long-term care services such as nursing care facilities. Benefits are available to individuals who need assistance with the activities of daily living and are at least 18 years old.
It is funded through mandatory contributions from most employees in Washington. Employers must deduct 0.58% of an employee’s wages, and participation is mandatory for most full-time, part-time or temporary employees. Payroll deductions started on July 1, 2023.
Sullivan said federal employees, employees of federally recognized tribes and those who are self employed are not mandated to participate in the long-term care insurance program, but they may choose to participate.
Certain employees may apply for voluntary exemptions from participation, including veterans with service, connected disabilities, spouses or registered domestic partners of active duty military members, temporary workers on a non-immigrant visa, workers whose permanent address is outside Washington, and employees who acquired private long-term care insurance before November 2021.
Contributors don’t immediately get to benefit. They have to contribute for at least 10 years without a gap of five or more consecutive years, or for three of the last six years before the date a person applies for benefits.
Sullivan said a person born before 1968 may receive partial benefits based on the number of years they contribute to the program.
Benefits under this program become available on July 1, 2026. Sullivan said the initiative doesn’t specify the timing or process for employees or self-employed persons to either elect to keep coverage or opt out of the program.
Public hearing for I-2124
Lisa Ornstein spoke on behalf of Judith Bendersky, a certified gerontologist and Medicare adviser who couldn’t attend the meeting. Bendersky was in favor of the council opposing the measure.
“For 25 years, I’ve met with families and individuals who have discovered sadly that Medicare isn’t going to cover costs for their long-term care needs,” Bendersky said. “Many of them have had to spend down every last penny they worked hard all their lives to earn in order to go on to the state Medicaid program that we call Apple Health in Washington.”
Medicaid is a joint federal and state program that helps cover medical costs for some people with limited income and resources.
Bendersky said the reality is that long-term care insurance will be unaffordable and inaccessible to anyone who has received a traumatic medical diagnosis. Bendersky said Washington Cares, which Initiative 2124 seeks to undercut, is a brilliant remedy for that problem.
Jim Lazar said as with other initiatives this election, voters are being offered a false economic choice by I-2124.
Lazar said it’s advertised as a chance to save a few pennies now at a likely much greater cost later.
“Like social security, WA Cares asks Washington residents to stand together, pitch in a modest amount of their wages and assure some additional stability for a growing segment of society and perhaps for themselves later in life, when they are in need of long-term care support and services,” he said.
Lazar said I-2124 would make the long-term care program unsustainable because many are expected to opt out. He said initiative proponents have written that a yes vote will make WA Cares voluntary, and a no vote will keep the program as is, but that’s misleading.
“Most analysts say that by making our state’s long-term care program opt in, it will cause a death spiral, ultimately bankrupting and killing the program,” Lazar said. “Millions of Washingtonians would be left without any long-term care coverage.”
This story was originally published October 16, 2024 at 1:52 PM.
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