Washington Governor Jay Inslee has submitted the state’s next budget. Out of the budget proposal has come a bill that hugely impacts small business. The first — and most onerous — is a 9% capital gains tax on the sale of a business by a small business owner. The second is an increase in the B&O tax of 66%.
The bill is Senate Bill 5129.
The second part of the bill — so far — does not impact the independent insurance agent members of PIA Washington/Alaska. The sale of insurance is exempt. It is an increase for service industry businesses like attorneys, accountants, architects, etc.
The first part of SB 5129, however, will impact the association’s hard working entrepreneurs.
Last week the Senate Ways and Means Committee held a hearing on the tax. After hearing testimony — including that of former PIA Washington/Alaska President Dick Fournier and others in the insurance industry— it is predicted that the committee will send the bill onto the full Senate.
At that point, the PIA Washington will send out a call to action to oppose and will ask you to contact the governor and local legislators.
In his testimony, Fourier noted — like others in opposition — that hundreds of small businesses will be impacted. He said, “For many of us decades of work began small. We worked nights and on weekends, and sometimes seven days a week. Our client lists often came from a phone book and we reached them via telephone. As the business grew the plan was to eventually sell and use the profit of that sale for retirement.”
None of us — he pointed out — counted on losing 9% of that profit to this unfair tax. That 9% he said, “will have to be passed onto the buyer.”
He concluded by telling the committee that business owners — especially those of small business insurance agencies — work very hard for small commissions.
These agents, he said, “are among the hardest working people in the state. This is a top-heavy tax that is not fair and that will reduce the value of the business built by hard-working entrepreneurs.”
In an interview with Weekly Industry News, PIA Washington Lobbyist Mel Sorensen said, “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.”
Testifying with Fournier was National Association of Insurance and Financial Advisors (NAIFA) spokesman Wayne Lunday.“That’s my retirement,” he said. “That’s the retirement of all the NAIFA members that are out there building those small agencies and small businesses. And it’s going to devastate them if they have to write a check for 9% of what their business is worth to the governor.”
The bill does have exemptions from the tax:
• The sale of a residence
• Property used in a trade or business
• Cattle livestock
• Timber and agricultural lands
• Traditional retirement accounts
The tax would tax long-term gains over $25,000 for a single filer and at $50,000 for joint filers. If passed, it starts in 2020.
Sources: Weekly Industry News, Whidbey News Times