Written by Devin Loughlin, CFP®, ChFC®, RICP®
Rejection of Initiatives 2109 and 2124: What That Means for Washington Residents
On November 5th, 2024, Washington state voters rejected two key initiatives that aimed to overturn or modify existing policies that have been a point of contention for many residents. Initiative 2109, which sought to repeal the state’s capital gains tax, and Initiative 2124, which proposed allowing individuals to opt out of the state’s long-term care program, both failed to garner enough support at the ballot box. These initiatives highlight the ongoing debates around taxation, healthcare, and government intervention in Washington’s policies. Let’s dive into what these initiatives were about, why they were proposed, and what their rejection means for the future of the state.
Initiative 2109: Repealing the Capital Gains Tax
In 2021, Washington state became the 42nd state to implement some form of capital gains tax. The tax, which imposes a 7% levy on the sale of stocks, bonds, business interest or other investments and tangible assets over $250,000 (this limit is set to increase over time – $262,000 as of 2023), was touted as a progressive move to address the state’s notoriously regressive tax structure. The Washington state government hoped it would generate revenue to fund critical public services like education, healthcare, and infrastructure.
Initiative 2109 sought to repeal this tax, claiming it would hurt small businesses, entrepreneurs, and investors in Washington. Opponents argued that the tax could drive people out of the state, especially those with significant wealth, and undermine the state’s economic competitiveness.
Despite the efforts of those who supported Initiative 2109, the measure was rejected by a majority of voters 64.1% to 35.9%.
Initiative 2124: Opting Out of the State Long-Term Care Program
The other notable initiative, Initiative 2124, proposed allowing people to opt out of the Washington state long-term care program (WA Cares Fund), a publicly funded program designed to assist residents who require long-term care services. The program, which began collecting premiums in 2022, is set to pay out a benefit of up to $36,500 for those who need long-term care services such as nursing home care, in-home care, or adult daycare. The state began collecting the tax on July 1, 2023, after an almost 18-month delay as they sorted out some of the primary concerns with the fund including people living outside of WA but working in the state, the ability to use the benefit if you move out of WA in the future and allowing service members and certain veterans the ability to opt out. The goal of the WA Cares Fund is to address a critical need in the state, where the cost of long-term care can be financially devastating, especially for seniors.
Opponents of the program argued that it was poorly designed and unfairly burdens taxpayers. Currently Washington workers’ pay .58% ($0.58 per $100 earned) of their income towards the tax unless they are part of the current list of exemptions allowed which you can find on the state website https://wacaresfund.wa.gov/how-it-works/exemptions. There was a brief window from October 1, 2021 to December 31, 2022 that you could apply for an exemption from the state if you owned a private long-term care insurance on or before November 1, 2021, but that option is no longer available. Initiative 2124, if passed, would have allowed individuals to voluntarily exit the program and avoid the payroll tax that funds it.
However, voters narrowly rejected Initiative 2124, 55.5% to 44.5%, signaling support for the state’s long-term care program and its universal approach to addressing the aging population’s needs.
What Does This Mean for Washington State’s Future?
Initiative 2109 rejection – The Washington state capital gains tax will stay in effect but will only impact approximately 3,000-4,000 households in the state out of the roughly 8 million people. It seems as though the revenue generated may vary widely form year to year and it’s likely there will be more changes to this tax in the future.
Initiative 2124 rejection – Washingtonians that are not exempt from the WA Cares Fund tax will continue to pay into the program going forward. Benefits are eligible to be paid out starting in 2026 and we will see how well this plays out since we are the first state to approve a state-run long-term care plan.
Voters in Washington have spoken, and while these results mark a significant moment in the state’s history, it’s clear that the debate over taxes, long-term care, and the role of the state will persist in the years ahead.
