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Report by Rich Smith in The Stranger 4/1/22:

The Campaign to Repeal the Capital Gains Tax Is Off to a Bumpy Start

Shortly after Tim Eyman failed his quest to block “personal income taxes” and repeal a new tax on capital gains all at the same time, a few wealthy conservatives launched a campaign to simply repeal the capital gains tax. If successful, the “Repeal the Capital Gains Income Tax” campaign, or I-1929, would strip away half a billion dollars per year for childcare and education. Luckily for the children, the campaign is already off to a bumpy start.SPONSORED

A complaint filed to the Public Disclosure Commission last week accuses the campaign of failing to disclose pledges in a timely manner, noting the sizable gap between its pledges and its debts.

Repeal the Capital Gains Income Tax spokesperson Mark Funk rejected the accusation, calling it “without merit.”

According to the PDC, at the end of last month the campaign owed more than $100,000 in debts but only listed $45,000 in pledges from a couple rich guys and former Republican gubernatorial candidate Bill Bryant, whose goofy delivery of the phrase “I get it” in his 2016 TV ad has yet to leave my mind. In any event, the person who filed the complaint, Pam Johnson, pointed out that the gap between pledges and debts suggested that something fishy was going on. She argued that the consultants to whom the campaign owes money would not have taken on the work without knowing who was buttering their bread, and so the campaign must have given those consultants some assurances that the money was coming from one source or another. The failure to disclose those funding sources when they were pledged would essentially constitute a “secret pledge,” and thus potentially violate state campaign finance laws.

Johnson, who ran a 2013 statewide initiative in support of adding GMO labels to foods, took this opportunity to note that the capital gains tax repeal campaign owed nearly half of its money to three people connected to the “No on 522” campaign, which opposed her labeling initiative back in the day. That opposition campaign was funded by the Grocery Manufacturers Association, which was forced to pay an $18 million penalty after Attorney General Bob Ferguson sued them for deliberately concealing the sources of their funding. Those funding sources, of course, turned out to be a bunch of food and beverage companies who didn’t want to label their products.

In this new complaint, Johnson called out Funk (who consulted on the “No on 522” campaign), Heather Clark (the treasurer for that campaign), and Peri Hall (a former vice president of Winner & Mandabach, a firm that took in a bunch of money from “No on 522”) as “all associated in some way with the Grocery Manufacturers deception.”

“Rather than the secret accounts and contribution laundering efforts at play in Grocery Manufacturers, here it appears the committee has found a new tactic: simply not disclosing pledges,” Johnson wrote.

In an email, Funk dismissed the complaint and said the campaign “has and will continue to report all contributions, expenditures, pledges, debts and other obligations accurately and timely according to PDC requirements.”

He added that campaign committees often carry debt “especially in the early stages,” and said it was “fairly common” for vendors to “make decisions for themselves about whether they believe that a given campaign has the ability to raise money for or against a particular measure.”

Funk also called the vague allegations of wrongdoing leveled at him, Hall, and Clark “a purely politically motivated misrepresentation of the facts,” and said “no individual vendor or officer of Repeal the Capital Gains Income Tax has ever received a campaign fine of any kind nor ever been accused by the PDC or the AG of any wrongdoing or any PDC violation.”

Finally, he said that the PDC had yet to notify the campaign committee of Johnson’s complaint, but they nevertheless stood “prepared to comply fully with any PDC requests.”

Speaking of pledges, a group called Invest in Washington Now, which lobbied to pass the capital gains tax in the first place, just launched a “decline to sign I-1929” pledge in the hopes of stifling the campaign’s signature-gathering efforts. “A few super wealthy people are backing I-1929 because they want to rig the tax system for themselves, making the rest of us pay. That’s just greedy and wrong. And we won’t let them get away with it,” Invest in Washington Now Executive Director Treasure Mackley said in a email.

What’s shaping up to be a big initiative battle may become wealthy Washingtonians’ last defense against a small tax that would only hit a few thousand people in a state of more than 7.6 million. Last Friday AG Ferguson asked the state Supreme Court to consider an appeal of a ruling from a Douglas County Superior Court judge who tossed the tax earlier this month on the grounds that it violated a state constitutional prohibition against graduated income taxes. If the Court overturns that ruling, then expect this repeal campaign to get real serious real quick as the rich scramble to avoid paying their fair share.

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Report by Paul Queary in Washington State Wire 3/29/22:

The real capital gains tax repeal initiative appears

Looks like we’re going to have that ballot-measure throwdown over the capital gains tax after all. Without fanfare, Repeal the Capital Gains Income Tax, a committee thus far fueled by a handful of wealthy conservatives, filed an initiative to repeal the tax late Monday afternoon. The tax has already been declared unconstitutional by a lower court.

The initiative was filed by J. Vander Stoep, a Republican political consultant and lobbyist who chairs the committee, which has been quietly paying a roster of hired-gun consultants for months now. Its nature and timing allow us to dig into the complex political dynamics of this issue, which we know y’all enjoy. 

A narrow approach

First of all, it’s just a straight-up repeal, meaning that it would scrub Washington law of all mention of Senate Bill 5096 from last year, eliminating the 7 percent tax on most capital gains over $250,000, which is expected to bring in about $500 million per year when it’s fully implemented.¹

That’s interesting because it only bails out the relatively small number of wealthy people who would pay the tax, without installing some broader prohibition of an income tax to appeal to the many voters who enjoy the fact that Washington doesn’t have one of those.²

That’s likely a tactical legal decision by the committee designed to protect the initiative from a court challenge if it passes. Focusing the initiative narrowly guards against challenges under the single-subject rule, which was successfully used a few years ago to invalidate a decades-old law banning local income taxes.

It’s also an indication of confidence that they don’t need to get cute to win. The last time the issue of taxing the wealthy was before the voters of Washington, in the form of the income tax on high earners envisioned in Initiative 1098 a dozen years ago, it went down in flames.³ More recently, voters overwhelmingly gave the capital gains tax the thumbs-down in the non-binding advisory vote that was on the November ballot.⁴

But…

It allows the defenders of the tax to go all-out on the Robin Hood messaging, which they’ve already started with their Wall of Shame campaign against the rich folks backing the initiative. 

The defenders point to multiple polls indicating that taxing the very rich is popular.⁵

The committee also likely has another problem in the form of a new requirement that the impact of a ballot measure on government services actually appear on the ballot. House Bill 1876, sponsored by Rep. Mia Gregerson, D-SeaTac, is currently sitting on Gov. Jay Inslee’s desk, but it seems unlikely that he won’t sign it. 

Assuming he does sign it, that means the ballot will include language along the lines of: “This initiative would decrease funding for child care and schools.” 

That’s never happened in Washington’s long history of anti-tax ballot initiatives, which have always offered voters the opportunity to lower their taxes without directly confronting the impact.⁶

A cloudy legal picture

This initiative campaign is also almost certainly going to happen in a weird legal limbo, because the tax has been ruled unconstitutional, at least for now. Superior Court Judge Brian Huber out in Douglas County tossed it out in late February, rejecting the state’s argument that it’s an excise tax on a transaction as opposed to a tax on income. 

The state’s going to appeal, and the whole thing winds up in front of the Washington Supreme Court, but that’s going to take a while. Once Huber issues his formal order, the state has 30 days to appeal. But even if the case bypasses the Court of Appeals and goes direct to the Supremes, they work in their own sweet time. We shouldn’t expect a ruling this year, which will surely irk a lot of people wondering whether to pull the trigger on that big deal. 

Where’s the money going to come from?

Just getting on the ballot could cost as much as $3 million⁷ because the pandemic and a robust initiative year in California are driving up the cost of signature gathering. Qualifying for November’s election will require 324,516 signatures from registered voters by July 8. The committee had raised less than $50,000 as of the end of February and was $100K in the hole to the aforementioned hired guns. (This presumably temporary lack of cash prompted us to rashly speculate that the campaign wouldn’t happen.) Somebody’s going to have to start writing big checks soon; those folks like to get paid. 

The campaign itself could wind up costing $20 million or more. While thousands of people have millions of reasons to want this tax gone, very few would pay enough taxes to realize a positive return on investment on a five- or six-figure campaign contribution. The next round of filings to the Public Disclosure Commission, due April 11, should make for interesting reading.

The small number of donors we know about are prominent conservatives who oppose the tax on principle and aren’t shy about rumbling in the political arena; many other potential supporters might be leery of the public-relations downside of such a campaign. In theory, big companies that compensate their executives and other employees with big grants of stock should want this to go away, but that doesn’t mean they want to be on the list of fat cats taking money away from child care and education, or crosswise with Inslee and the Democrats who currently control the Legislature. We’re told, for example, that Amazon won’t be playing.⁸

Defenders of the tax have fat cats of their own

One of the reasons that the Legislature found the votes to pass the tax in the first place was the advocacy of the millionaires and billionaires whose money fuels the Democratic Party of Washington. For example, the massive increases in state support for child care and early learning that the tax is supposed to pay for were a labor of love for Lisa Mennet, the party’s single largest donor. Hard to imagine she’s not there to defend it. 

Likewise, you can expect aggressive spending from the public-sector unions that supported the tax, including the Washington Education Association and SEIU 775, which currently has nearly $4 million sitting in its ballot-initiative-focused PAC. 

A boon for Republicans?

With inflation, homelessness, war, and $5-a-gallon gas, this November figures to be rough on the party in power up and down the ballot. The political operatives working to chip away at the Democrat majorities won’t mind layering a big campaign that’s kinda-sorta about an income tax on top of that. But the fundraisers have to be a little nervous that the initiative will siphon money away from candidates and PACs that support them. 

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Report by Nick Bowman in MyNorthwest 3/23/22:

New initiative backed by conservative donors takes aim at Washington capital gains tax

There are currently four separate pushes to create a ballot initiative to repeal Washington’s recently-implemented capital gains tax, with the latest effort entering the fray with tens of thousands of dollars of PAC money in tow.

Court battle over capital gains tax could rewrite Washington’s tax code

The initiative was filed Monday night by Chehalis attorney J. Vander Stoep, backed by a committee registered with the state as “Repeal the Capital Gains Income Tax.” In practice, it would repeal SB 5096 — signed into law last year and effective since January 2022 — which created a 7% excise tax on the sale or exchange of capital assets above $250,000.

In its text, the initiative alleges that state lawmakers “will continue to try and impose taxes on different forms of income” if the capital gains tax is allowed to remain in place, “despite voters repeatedly rejecting such taxes.”

The committee has raised a total of $5,200 since it was registered in December of 2021, but also has $45,000 in pledges lined up from a collection of prominent conservative Washington donors. That includes a $5,000 pledge from former Republican gubernatorial candidate Bill Bryant, $20,000 each from Taiyo Pacific Partners CEO Brian Heywood and former trucking company head Steve Gordon, and $5,000 from former Starbucks executive Howard Behar.

Both Heywood and Gordon have long thrown their support behind anti-tax initiatives in Washington, in addition to both contributing large sums to the Republican Party in the lead-up to the 2020 election.

Their effort is being opposed by a group known as Invest in Washington Now, led by Treasure Mackley, a former vice president at Planned Parenthood. In a press release sent Tuesday, it claimed that the initiative repealing the state’s capital gains tax would take $500 million annually from funding for repairs to aging schools, the creation of new preschools and child care centers, and assistance for students with disabilities.

“We won’t let a few super-rich people give themselves a huge tax cut, forcing the rest of us to pay more,” Mackley said. “Poll after poll shows voters strongly support making the rich pay what they owe our communities.”

That all being so, the initiative could also end up being a moot point by the time it would go in front of voters. In early March, a Douglas County Superior Court ruled the tax unconstitutional, siding with plaintiffs in supporting their definition of capital gains as income. The capital gains tax remains in place in the meantime ahead of a yet-to-be-determined date with the Washington Supreme Court.

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Report by Paul Queary in the Washington Observer 2/13/22:

Cap gains tax repeal committee shows its $$ — sort of

A couple of weeks ago, we broke down the legal and political fight brewing over the capital gains tax imposed by the Legislature last year. Among the interesting elements of that story was a nascent ballot initiative committee that was racking up debt with a bunch of hired-gun consultants but hadn’t yet reported how they planned to pay those folks.

Thanks to the Feb. 10 deadline to file with the Public Disclosure Commission — as always, raise a glass to the transparency-minded voters of 1972 — we know where some of the money is coming from.

The committee, prosaically named Repeal the Capital Gains Income Tax, has $20,000 pledges from Steve Gordon, a truck dealer who founded Concerned Taxpayers of Washington State, and Brian Heywood, a hedge fund manager. As we reported last year, both men plowed significant money into supporting Republicans in Washington State last year.

Neither man is shy about writing a check for a conservative candidate or cause. Heywood spent $150,000 last year on Yes on 1436, a somewhat unorthodox campaign to repeal the state troubled long-term care program. That initiative didn’t qualify, but the Legislature moved swiftly last month to delay the program and its unpopular payroll tax.

We hadn’t Googled Heywood in a while, so we were intrigued when we came across this Facebook video from a talk he gave at Reset Church last fall. It’s mostly about his hedge fund’s rescue of Roland1, the electronic instrument maker, but late in the talk, he drops a couple of interesting tidbits. First, he’s a significant supporter of the Washington operations of The Center Square, a newish conservative-leaning news organization focused on state-level coverage. Second, he’s a backer of Unleash WA, an interestingly anonymized organization “dedicated to helping all Washingtonians – regardless of background or political affiliation – unleash and realize their full potential.”

Unleash WA appears to be focused on opinion research at the moment. It’s been sending text messages to folks around the state inviting them to take a survey, which prompted some Observer readers to dig into exactly who they are. Thus far, the organization hasn’t responded to our nosy questions. Stay tuned for more in the coming weeks and months.

Now it should be noted that a couple of $20K pledges are drops in the bucket compared to the cost of a statewide ballot initiative campaign, which typically gets to be an eight-digit number when you hire the kind of operatives in play here.

Should the legal fight out in Douglas County go the state’s way — Judge Brian Huber is due to rule within a few weeks — expect other deep-pocketed players to emerge.

Along with Gordon and Heywood, the committee has $5,000 from Howard Behar, the former president of Starbucks, and a $5,000 pledge from Bill Bryant, who was the GOP’s sacrificial lamb in the 2016 race for governor.

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Op-ed published in The Stranger 2/21/2022: