Why should a Washington State capital gains tax bother PIA Western Alliance members in general? It’s just one state’s push to fill dwindling coffers. Other states have legislatures that are considering equally onerous measures.
As they pop up we will follow those as well.
In this case, any time a governor or a state Legislature begins the process of taxing the sale of a business at a level this high — and in this case the life’s work of a PIA member — it is a concern to all of us.
Washington Governor Jay Inslee has submitted a budget with two items that will heavily impact small businesses and with a Democratic Party super majority in both houses of the Washington Legislature, it will be a long, hard fight to defeat them.
The first piece is a 9% capital gains tax on the sale of a business. It has some exemptions but it applies to individual filers on a sale of over $25,000 or those filing jointly with a sale of over $50,000.
The second piece affecting businesses is a 66% jump in the B&O tax for the service sector. PIA Washington has been successful in defeating proposals to include its membership in the B&O tax. So this increase does not yet apply to licensed insurance professionals but will affect doctors, lawyers, architects and design professionals.
Members of PIA Washington/Alaska and the PIA Western Alliance will testify at a hearing on the 9% capital gains tax proposal on Wednesday, January 16th in Senate Hearing Room 4 in the Cherberg Senate Office Building.
The association is encouraging PIA members in Washington to attend that hearing.
PIA Washington lobbyist Mel Sorensen told Weekly Industry News that last year the governor wanted a 7% capital gains tax but couldn’t get it through. This year he wants 9% and has an excellent chance of getting the Legislature to approve the tax.
This is why this meeting is so important to PIA member agents and agencies.
“The capital gains tax would adversely impact many business owners — including PIA members who own their own businesses — because prospective capital gains from the sale of a business would be subject to the new 9% tax,” Sorensen said.
Sorensen said many member agents have spent their entire business careers building their business and this tax is very, very unfair and — in a way — punitive. The increased value of their agency is their life’s work and a life’s work ought not be attacked in this way.
And it is an attack.
“For many, they have spent their entire professional careers building their businesses. The value in their business is frequently what they plan to rely on for their retirements. It’s simply damaging to expose them to a new 9% capital gains tax. For these reasons, we oppose the Governor's proposal to enact a new 9% tax on Capital Gains in Washington State,” he added.
Here’s another problem with the proposal. It is based on an income tax system. Washington State’s constitution does not allow one.
“Federal law defines the measure of tax on NET capital gain income. Although the Governor's capital gains tax plan may call it an ‘excise tax and ‘for the privilege of selling or exchanging long-term capital assets, or receiving Washington capital gains,’ the departments of revenue for every state with a capital gains tax classify it as an income tax,” Sorensen noted.
And again, if possible — and if you are a PIA member in Washington State — please attend the meeting. It is Wednesday, January 16th in Senate Hearing Room 4 in the Cherberg Senate Office Building.