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Yesterday the Senate held a public hearing on its off-budget capital gains income tax proposal. Of particular note was the nonpartisan legislative staff bill report for the proposal. Here are some of the details:
- “Under the federal tax code, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income.”
- “In addition to the federal tax, capital gains are often subject to state income taxes. Most states do not have separate capital gains tax rates. Instead, most states tax capital gains as ordinary income subject to the state's income tax rates.”
- “The tax rate is 8.9 percent. Generally, the tax rate is applied to the capital gains amount reported on the individual's federal income tax return.”
- “The due date of the state CGT return is the due date for the federal income tax return, unless otherwise required by DOR.”
Also, according to the fiscal note for SB 5961:
- “Washington capital gains tax returns and payments are due at the same time that the taxpayer’s federal income tax return for the taxable year is due. Individuals receiving a federal tax filing extension also qualify for a state capital gains tax filing extension, but the tax is still due on the original filling date.”
- “DATA SOURCES: - Internal Revenue Service (IRS) - Personal income tax returns data, Federal Tax Year 2016, source for capital gains amounts.”
I feel like there’s a name for that type of tax, but I just can’t put my finger on it. Let’s see what the IRS says:
“This is in response to your inquiry regarding the tax treatment of capital gains. You ask whether tax on capital gains is considered an excise tax or an income tax? It is an income tax. More specifically, capital gains are treated as income under the tax code and taxed as such.”
Looks like there is universal agreement – a capital gains tax is an income tax.
Additional Information
Seattle Times op-ed: Call capital-gains tax for what it really is — an income tax
Tri-City Herald op-ed: House Democrats want to impose an income tax in Washington state
National tax experts agree – capital gains taxes are income taxes
Minnesota Legislature capital gains income tax FAQ
