And they just tried to use the law to keep you there
It was easy to miss. Last Sunday in the Northwest section of the Spokesman Jim Camden’s “Spin Control” unflashily presented “Judge: Voters deserve fiscal statement for 3 initiatives on the ballot.” Ho hum, more legal wrangling. Wrong. State Republicans tried to use the state courts to keep you in the dark—and the back story should make us voters hopping mad.
Three “Initiatives to the Legislature” will appear on the November ballot. The Republicans backing them really don’t want you the voter to know what the effect would be of passing them. Why? I-2109, for example, would repeal the Washington State Capital Gains excise tax. The state Republican leadership doesn’t want you to know that the first $500,000,000 from that excise tax (that’s half a billion dollars!) is earmarked to support public schools. They just tried to use the Washington State courts to keep that information off the ballot. Undoubtedly, these same folks will try to convince you before November that the capital gains excise tax somehow threatens your wallet. Horse feathers.
None of these Republican initiatives arose from a grassroots effort. They were hatched and funded by two men, Washington State Senator and chairman of the Washington State Republican Party Jim Walsh, and Brian Heywood, a wealthy California transplant who stands to benefit financially from I-2109. Heywood put up six million dollars to pay signature gatherers.
In 2022 Washington State passed a law requiring the addition of a “Public Investment Impact Disclosure statement” to ballot measures that have a fiscal impact. The statement is to be prepared by the state’s attorney general and appear in this form: “This measure would (increase or decrease) funding for (description of services).” What could be more reasonable? Sunlight is, after all, the best disinfectant. If, by voting for I-2109, you’re going to defund public schools it would certainly be a good thing to have that information.
As Camden’s Spokesman article details, providing information to the voter must have set off alarm bells with Washington State Republicans pushing these initiatives for partisan gain. Heavens! We wouldn’t want the voters to be informed! State GOP chairman Jim Walsh got right to work trying to convince Thurston County Superior Court Judge Allyson Zipp to issue a “writ of mandamus” to keep the legally required information off the ballot. Judge Zipp declined.
Below I have included a copy of my February 5th analysis of the “Republican Greed Initiatives.” It is worth reviewing—and talking over—well before the election.
The sordid back story of the three initiatives that will appear on the November ballot needs airing—tell a friend. Let’s make sure that voters see these initiatives for what they are.
Keep to the high ground,
Jerry
The Republican Greed Initiatives
And the wealthy man backing them
February 5, 2024
This November a package of six initiatives will likely appear on the presidential general election ballot in Washington State. They are “Initiatives to the Legislature” that might best be characterized as the Republican Greed Initiative package. Four of the six of them would overturn or outlaw taxes. The whole package will appear on the ballot thanks to the money and efforts of one über-wealthy migrant to Washington State, Mr. Brian Heywood, and Jim Walsh, the current chairman of the Washington State Republican Party. Initiative Measure No. 2109, “Concerns Taxes.” It is the mostly likely of the six initiatives to offer Mr. Heywood a return on his investment. Here’s the text:
This measure would repeal an excise tax imposed on the sale or exchange of certain long-term capital assets by individuals who have annual capital gains of over $250,000.
Quite a lot of background is in order here. Before this capital gains excise tax was instituted in 2022 Washington State funded its schools and roads and everything else it does with the most regressive tax system of all the fifty states. Now it as moved up to the second most regressive. A regressive system of taxation is one in which the least well off pay proportionally more in overall taxes than do the wealthy.
A progressive income tax, for example, the federal income tax, in which higher levels of income are taxed at a higher rate, is the classical antithesis of a regressive tax. However, in Washington State an income tax was deemed unconstitutional in 1933 by the State Supreme Court (see P.S. below).
In a nod toward instituting a hint of progressive taxation, in 2021 the Washington State legislature passed, and the governor signed, a law imposing an excise tax (“a tax levied on certain goods and commodities produced or sold”) on “certain capital gains”. (Explore the raw details here in the Revised Code of Washington [RCW].)
The imposition of a new excise tax on “certain” capital gains might have escaped your notice, since it doesn’t kick in until the “certain” capital gains exceed $250,000 (in one year)—something over which very few of us need be concerned. Worried about tax on the capital gains from the sale of your home or your farm? They’re exempt—as are a host of other capital gains, like those from the sale of livestock, timber, or stocks in your Individual Retirement Account (IRA).
So what capital gains are taxed? We might characterize them as “abstract capital gains,” primarily capital gains made on the sale of stocks and bonds or other financial instruments, just exactly the sort of transactions that grow wealth for people who are already wealthy. One might point to Mr. Brian Heywood, a former (and perhaps current) hedge fund manager (see P.P.S. below for a basic biography) and the fellow fronting the money to pay signature gatherers to put the Greed Initiatives on the November ballot.
This excise tax was first imposed starting in tax year 2022 with the revenue first coming in with tax returns filed in 2023. Of course, Republicans representing the wealthy were not going to accept this without a fight. They immediately sought to characterize the excise tax as an income tax—and thereby have it declared unconstitutional. (Even U.S. Representative Dan Newhouse [R-central WA] weighed in as grievously opposed, strategically leaving out mention of the exclusions and exemptions, thereby allowing his entire audience to imagine that their own nest eggs might be threatened by the tax.)
Oh, and take note: The first $500,000,000 (that half a billion dollars!) is earmarked to support public schools with any excess dedicated to school construction. (Public schools are otherwise often funded primarily by local property taxes. Accordingly, public schools in areas with a lagging property tax base tend to be underfunded. The excise tax on capital gains is meant as a least a beginning of a correction.)
Republican whining that the excise tax on capital gains is unconstitutional based on the Washington State Constitution failed to impress the Washington State Supreme Court. In March of 2023 the Court struck down the challenge. Just last month (January 2024) the U.S. Supreme Court declined to review the State Supreme Court ruling—and set the stage for the Republican Greed Initiative effort to deceive the voters into repealing the tax.
For tax year 2022, the first year of the capital gains excise tax, “[t]he DOR [Washington State Department of Revenue] estimates $889 million [more that twice early estimates] was collected out of a total of 3,765 returns, according to an agency spokesperson.” Do the math. At the tax rate of 7% that implies that the individuals behind these 3,765 tax filings in Washington State scored capital gains totaling an eye-popping 12.7 billion dollars (and that’s just the amount above the $250,000 exemption). (See P.P.P.S. below) For reference, that 12.7 billion dollars would be 18 percent of Washington State’s whole two year operating budget—or more than a third of the State’s annual operating budget. Even if these 3,765 tax returns represent 10,000 individuals, those individuals would represent less than 1/5 of one percent (0.14%) of the population of Washington State—a small fraction even of the fabled wealthiest “1 percent.”
Brian Heywood, apparently resenting that some of his annual capital gains might be used to educate the children of Washington State, didn’t wait for the judgement of the courts. He was busy in 2023 funding “Let’s Go Washington” with 6 million dollars to pay signature gathers. The money spurred ahead the suite of Greed Initiatives filed by Jim Walsh, the chairman of the Washington State Republican Party earlier in the year.
Mr. Walsh, the Republican Party, and Mr. Heywood are counting on at least forty years of disingenuous Republican anti-tax rhetoric to convince voters to turn out and vote against the interests of their own children. Judging by the crowd listening to Mr. Heywood in this video, you might wonder if he’s right. Don’t let it happen. Get people talking about the Washington State Republican Greed Initiatives coming on the November ballot and the strategy behind them with your friends, relatives, and acquaintances.
Keep to the high ground,
Jerry
P.S. We often hear that an income tax is unconstitutional in Washington State. That statement hinges on Washington State Constitutional Amendment 14, dating from 1930, which states: “All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax…” (from Article VII, Section 1—See pdf page 27 here). Three years later in the early years of the Great Depression, in 1933, 70% of Washington voters approved a state income tax—but a wobbly majority of the Washington State Supreme Court struck down the tax as unconstitutional, basing their decision on the word “uniform” in the 1930 Amendment 14. (See an entertaining version of that story here. For more technical detail, read here.)
P.P.S. What follows is from my post The Perversion of the Initiative Process published last November:
Brian Heywood is a fifty-something year old man with means and motivation. He graduated from Harvard in East Asian Studies in 1991. Before “graduation he spent three years living in Japan as a [Mormon] missionary and as a student. He joined and later served on the board of JD Power and Associates,” a data analytics, software, and consumer intelligence company, with offices in California. In 2010 Mr. Heywood moved to Redmond, Washington, where he works as a hedge fund manager, now serving as the CEO of Taiyo Pacific Partners LP. His current level of involvement at Taiyo is unclear. His employment is variously self-described in Washington State Public Disclosure Commission reports as a horse boarder, artist, and as retired.
Speaking at a gathering at the Reset Church in Marysville in 2021 (why is it always a Fundamentalist, non-denominational church?) he said, “I came from ‘the people’s republic of California’. I am an economic refugee. I came here to make money and to be free.”
Clearly, Mr. Heywood knows his way around using money to make money. Now he wishes to use that money and his expertise to change the politics of the State of Washington to suit his own pecuniary and political interests. His donation to the Loren Culp campaign for governor of Washington in 2020 (see page 12 [at that link]) offers a window on his political leanings. In the Facebook video of his Reset Church talk in 2021 [the year before the excise tax on capital gains was first applied] he says, “I and some of my friends have begun to fund” various efforts, including the Washington chapter of the right wing news outlet, The Center Square. He “will be starting” Unleash.com. In his speech, Mr. Heywood likens building back the Republican Party in Washington State to the many years of planning and groundwork in re-building a corporation.
P.P.P.S Even if these folks behind these 3,765 capital gain excise tax returns had zero income in earned wages (on a Form W-2) I posit they were still be able to live very well on that 250K—even after paying around 30K in federal capital gains tax. (Note that the marginal federal tax rate of 15% on capital gains is, for no reason I can justify, universally less than the marginal tax rates for earned income reported on a W-2, which, at comparable levels of earned income, were 22% and in 2022 ramped up to a maximum marginal rate of 37%.)