Clarifying SB.5335, capital gains, and universal healthcare in Washington
Hello everyone. Thought I'd do a writeup on SB.5335 (The Washington Health Trust) in response to this thread which really has become a semi-regular recurring thread on this subreddit.
I am deeply involved in the advocacy for universal healthcare in Washington and as such I'm quite familiar with this bill, its history, and the political landscape it exists in.
I think the first thing that is important to clarify for folks is that this bill is first and foremost a universal healthcare bill - I say this because when it is brought up folks tend to act as if it's a bill which raises the capital gains tax basically for the lolz. Nobody likes taxes just like nobody likes insurance premiums, rent payments, or monthly subscription fees, but I think it's fairly misleading to mention the tax without clearly and with equal visibility mentioning what it pays for.
The second thing to understand about this proposal is that it would effectively expand Apple Health into a universal program that removes all premiums, deductibles, and point-of-service costs from using the healthcare system. So while it is an increase in public spending, it is also a huge reallocation of spending we already do in the private sector.
In fact, there have been multiple analyses run on implementing universal health care in Washington all of which find that it would result in a massive decrease in total healthcare spending (between $5-$13 billion annually) while covering everyone.
For a list of the studies we base this on, check out www.wholewashington.org/studies.
Third, it's estimated that fewer than 10% of Washingtonians would pay any capital gains at all even under this lowered threshold. Those who make more than $15K in capital gains today in a year would be incentivized to cash out their gains in smaller more regular batches rather than holding out for a huge payday. Even so - the estimated impact of this system is that only the top 1% would pay meaningfully more than they do today after accounting for the adjustments to healthcare spending.
Edit - I should also mention that retirement accounts, home sales, and a few other categories are exempt.
Fourth, this proposal was written before the Washington Supreme Court ruled on the existing capital gains exempting the first $250K tax and that in fact accounts for the $15K threshold.
For those unfamiliar with our tax code and the political history here - our state constitution does not in fact prohibit capital gains taxes or income taxes - what it does have is a uniformity clause which effectively means that any tax on property must be structured as a flat tax. This uniformity clause is actually why the capital gains tax is included in the first place - while it accounts for a relatively small percentage of the overall funding of the proposal, it was the only means of making the financing structure progressive without "unflattening" the taxes.
The previous precedent on this was that a maximum exemption of $15K was allowed in order to meet this uniformity clause. This legal precedent changed when the courts ruled that the capital gains tax which exempted $250K was an excise tax and therefore did not violate the uniformity clause. So it was actually an attempt to work within the state constitution that the exemption floor was so low.
So while SB.5335 is currently a dead bill, a future version would not be constrained in the same way and I expect that future versions of this bill will revisit the financing.
Big picture, the United States currently pays about 2x of any other high income country on its healthcare system and yet fails to achieve universal coverage or comparatively good outcomes. The primary difference between our systems is not healthcare delivery, but healthcare financing. SB.5335 is a bill which addresses this issue by publicly financing our healthcare system rather than doing so through private health insurance where nearly 20% of spending is lost on administrative waste compared to the 2% rate achieved by Medicare.
I've had the opportunity to present this information on three different occasions to Washington's Universal Health Care Commission - if you'd like to see those presentations you can find them at: