Washington Initiative Filings to Repeal Capital Gains Tax Proliferate Despite Fee Hike

OLYMPIA, Wash. – Opponents of Washington state's capital gains tax have filed a dozen separate initiative proposals seeking its repeal as of late May 2026, a volume that represents nearly half of all initiatives submitted this legislative cycle. This surge of activity comes even after the state legislature significantly increased the filing fee, a move that was intended to curb the total number of proposals.

The wave of anti-tax filings highlights the persistent and contentious debate surrounding the state's 7% tax on capital gains exceeding $250,000 annually. According to a May 31 report from The Spokesman-Review, the high concentration of filings targeting this single tax is particularly notable given the overall decrease in initiative proposals since the fee increase was implemented.

Earlier this year, state lawmakers raised the cost to file an initiative to the people from a nominal $5 to $5,000. Proponents of the legislative change argued it was necessary to ensure sponsors were serious about their proposals and to reduce the administrative burden on the Secretary of State's office from processing frivolous or duplicative filings. While the new fee appears to have reduced the total number of initiatives filed, it has not deterred a concerted effort from groups focused on repealing the capital gains tax.

Enacted in 2021 after years of debate and legal challenges, the tax applies to profits from the sale of long-term assets such as stocks, bonds, and business interests. It was framed by supporters as a progressive tax on the state's wealthiest residents, with the revenue earmarked to fund education and childcare programs. The law includes several key exemptions, most notably for the sale of all real estate, assets held in retirement accounts, and the sale of certain qualified small businesses.

For many small and mid-sized business owners in Washington, however, the tax has significant implications, particularly during a sale or ownership transition. The profit realized from selling a company can easily push an owner above the $250,000 threshold in a single year, triggering a substantial tax liability that did not exist prior to the law's passage. This has made the tax a primary target for business advocacy organizations and conservative think tanks, who argue it stifles investment, punishes entrepreneurship, and functions as a de facto income tax in a state that has long prohibited one.

The multiple proposals now on file with the Secretary of State's office vary slightly in their approach. Several call for a straightforward repeal of the entire tax statute, returning the state to its prior tax structure. Others propose amending the state constitution to explicitly ban all forms of income tax, which would include a tax on capital gains, aiming for a more permanent legal roadblock against future legislative efforts. This “shotgun” approach of filing similar but distinct initiatives is a common political strategy, allowing sponsors to conduct polling and focus their signature-gathering efforts on the version that appears most likely to succeed with voters.

This is not the first time opponents have taken the issue directly to the ballot box. A previous repeal effort, Initiative 2109, successfully passed in November 2024, but the long-term effects of that vote remain subject to ongoing legal interpretation and potential court challenges. The current flurry of filings suggests that opponents are pursuing a multi-pronged strategy to ensure the tax is permanently removed from state law.

The constant back-and-forth over the capital gains tax creates a volatile environment for business owners planning for the future. While the prospect of a repeal is appealing, basing a multi-year strategy on the outcome of a single election is a significant gamble. We have seen firsthand how legislative uncertainty can delay or complicate major transactions, such as the sale of a business or a significant capital investment. The key is not to wait and see, but to plan for multiple scenarios. Understanding your potential tax exposure under the current law is the first step toward building a resilient financial strategy that can adapt to changing regulations. For businesses navigating these complexities, our expertise in tax preparation and compliance is critical. To build a proactive plan, business owners can contact C&S Finance Group LLC at csfinancegroup.com for guidance tailored to their specific situation.

Sponsors of the dozen initiatives now have until the state's July 5 deadline to collect the 324,516 valid signatures required from registered voters to qualify for the November ballot. The coming weeks will see a major signature-gathering push across the state. Which of these proposals, if any, ultimately appear before voters will determine the next chapter in Washington's long and contentious debate over taxation and wealth.