Capital Gains Tax reversal may have budget impacts

Mar 10, 2022
Written by WR Communications

Last week, the Douglas County Superior Court ruled the capital gains tax unconstitutional. The ruling declares the tax is an income tax and therefore violates the state constitution’s uniformity requirement, a 1% limit on property taxes.

Attorney general Bob Ferguson has stated he intends to appeal.

How would the state’s budget be affected should the state supreme court agree to the tax’s unconstitutionality?

Should the capital gains tax be found unconstitutional, the state would have approximately $1.2 billion less to spend over the outlook period. That said, the February 2022 forecast included NGFO revenues at $10.129 billion higher through the outlook period than Legislators expected last year. That amount does not include anticipated capital gains tax revenues.

As legislators work to finalize the 2022 supplemental operating budget, WR urges the legislature to rework their spending plans to increase reserves. By doing so, state programs could be sustained irrespective of the supreme court agreeing to the capital gains tax’s constitutionality.

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