Washington Gov. Jay Inslee rolled out a two-year $1.16 billion tax package Thursday, fortified by a capital gains tax on investments and the sale of personal property.

The tax would not apply to retirement accounts or income from selling farms, livestock, timber, homes or sole-proprietor businesses, according to the governor’s office.

The 9% tax would apply to stocks, bonds and proceeds from selling other assets, such as real estate, collectibles and art, according to the Department of Revenue.

Capital gains over $25,000 for individuals and $50,000 for joint filers would be taxed. The tax would support Inslee’s proposal to increase spending in the two-year operating budget by 10.5% to $57.5 billion.

The budget does not include any revenue the state would collect if the Legislature adopts Inslee’s proposal to make manufacturers bid for carbon emission credits.

The governor also has proposed a mandate to mix more alternative fuels into gasoline and diesel, a policy expected to raise prices at the pump.

Rep. Drew Stokesbary, the top-ranking Republican on the House Appropriations Committee, said it was “unconscionable” to raise living costs during a pandemic.

“Government lobbyists and progressive activists might appreciate this budget, but it does virtually nothing to help Washington families exhausted by 2020 and anxious about the new year,” he said in a statement. 

Inslee proposed raising spending in several areas. He said the spending will help the economy rebound from COVID-19. “We need to put more money in the tank to keep this recovery going,” he said.

Coronavirus lockdowns have reduced the size of the private-sector economy. State tax collections, however, are projected to grow this fiscal year by nearly 5%, even without tax increases.

The governor has proposed a capital gains before, unsuccessfully. A capital gains tax would presumably be challenged in court as an income tax that violates the state constitution.

Inslee said he was confident a capital gains tax would stand up in court and will pass the Legislature.

The general election brought in a “new infusion” of Democrats “ready to hit the ground running in regard to fairness.”

“The desire for economic justice has just come to a boiling point in this state,” he said.

If passed, the capital gains tax will take effect July 1, 2022. Inslee said the state will need a year to get organized to collect the tax.

The governor’s office estimated the tax would impact about 2% of Washington households a year, shifting $1.12 billion from private hands to the state the first year. The state projects taking in $2.4 billion over the following two years.

Inslee said he expects the capital gains tax to outlast the pandemic. “The needs will be continuing,” he said.

The governor also proposed a new tax on health insurers that would net the state $205 million the first year.

Narrowing a tax law that allows businesses to write off bad debts would transfer $36.2 million to the state over two years, according to another proposal by the governor.