Jay Inslee wants to increase taxes on rich people like Bill Gates.
Jay Inslee wants to increase taxes on rich people like Bill Gates. JACK TAYLOR/GETTY IMAGES

After rolling out a mostly milquetoast climate agenda earlier this week, Gov. Jay Inslee brought out a progressive hammer Thursday with a two-year budget proposal that includes the creation of a capital gains tax and funding a nearly billion-dollar program to try to save Puget Sound’s orcas.

Progressives have long called for Washington to implement a capital gains tax—which is a tax on things like investments, bonds, and stocks—as a way of making the state’s tax system more fair to poor people. Washington currently has what is considered the most regressive tax system in the nation, meaning poor people pay a much larger share of their income than rich people. Inslee’s capital gains tax, which his office said would only impact 1.5 percent of Washington’s population, would make the state’s tax system slightly more equitable.

It will also increase revenue by almost a billion dollars over the two-year budget which will help boost investment in a range of areas, including K-12 education, the mental health system, and the orcas! Some highlights:

•$675 million in spending over the course of two years on mental health in Washington, including $56 million for the state’s two state-owned psychiatric hospitals and $7.5 million to predesign a new 500-bed hospital to replace the troubled Western State Hospital.

•A combined $1.1 billion on investments to help the Puget Sound’s endangered resident orcas. Inslee was already required to spend money on some of these projects, including hundreds of millions of dollars to comply with a federal lawsuit regarding salmon habitat along small waterways. The governor’s budget also includes $750,000 for a task force to study the removal of the Lower Snake River dams, considered one of the most impactful ways to improve Orca habitat.

•Inslee’s budget continues the investment in K-12 education that was mandated by the Washington Supreme Court’s McCleary decision, which found that the state was illegally underfunding public education.

Inslee’s capital gains proposal is part of a larger revenue shift that should make the state’s tax system more equitable. The capital gains tax will be “geared toward very large capital gains” that would affect “only a tiny fraction of the state’s wealthiest taxpayers,” according to the governor’s budget. There are exemptions for retirement accounts, homes, and farms. Inslee is also proposing an increase to the state’s business tax on professional services like lawyers, accountants, and real estate agents. The budget also includes changing the state’s real estate excise tax to make it progressively increase as a property is worth more value. Inslee’s office said this would lower the tax rate on sales of lower value properties and increase the tax rate for properties worth more than $1 million.