Income tax

Capital Gains Tax Battle Will Remain in Court » Publications » Washington Policy Center

The next steps on whether Washington will remain exempt from income tax will be in court as the I-1929 campaign to repeal the capital gains tax has suspended operations. Earlier this year, a judge appointed by Inslee ruled that the capital gains tax was unconstitutional. The Attorney General is asking the State Supreme Court to take the case for direct review.

The Everett Herald reported Friday that the I-1929 election campaign was not advancing:

“The sponsors of the 1929 Initiative said Friday they would not proceed and would instead await the outcome of a lawsuit challenging the legality of the tax.

“While our poll shows voters overwhelmingly support the repeal of the capital gains tax, our coalition is confident in the strength of the court case and we believe the lower court’s decision will be upheld on appeal.” , said Mark Funk, spokesman for the policy committee behind the measure. “Therefore, we believe the best coalition strategy in 2022 is to trust the courts to overturn this illegal tax.”

Although I-1929 will not advance, the successful ballot title challenge should prevent the Attorney General from playing additional games on future voter efforts to repeal the capital gains tax if the courts decide to somehow decide that we don’t own our income (as requested by the Washington Education Association in a legal brief).

The income tax supporters’ threat to create a ‘hotline’ to make every effort to collect ballot signatures ‘as costly and uncomfortable for them [I-1929 campaign] as possible,” remains troubling. RCW 29A.84.250(4) said:

“Any person is guilty of a serious offense who . . . Interferes or attempts to interfere with the right of any voter to sign or not to sign a referendum initiative or petition or with the right to vote for or against a referendum initiative or measure by threats, intimidation or any other means or corrupt practice…”

I asked the Office of the Secretary of State about plans by opponents of I-1929 to implement a signature collector monitoring system given RCW 29A.84.250(4) and received this non- answer :

“This office has no role in the process of collecting signatures. We certainly encourage voters to read all documents thoroughly before signing.

Although the I-1929 campaign ceased its efforts, it is important to remember the shady anti-election legislative history to which it was responding. I-1929 was filed after lawmakers prevented a public vote on the new capital gains tax (SB 5096) by adding a bogus emergency clause to stop a referendum on the new tax. In a floor speech, Democratic Sen. Mark Mullet called out his party for the backdoor emergency clause used to strip Washingtonians of their right to a capital gains tax referendum. Senator Mullet said:

“I find it extremely disappointing that we have now left no stone unturned to ensure that the people of Washington state are not able to challenge this bill through the referendum process.” (Comments at 52:47 min floor debate mark)

With lawmakers preventing a referendum on SB 5096 and the I-1929 campaign suspending its activities, the only public vote to date on the new capital gains tax was the nonbinding advisory vote in 2021. At the time, 61% of voters recommended repeal of capital gains tax.

With the I-1929 campaign suspended, we now wait to see if the state Supreme Court decides to conduct a direct review or allows the Court of Appeals to act first on the income tax lawsuit. capital gains.

As a reminder, here’s what the Inslee-appointed judge ruled in March regarding capital gains tax:

“ESSB 5096 is properly characterized as an income tax pursuant to Culliton, Jensen, Power and other applicable Washington case law, rather than an excise tax as argued by the State. . . ESSB 5096 is declared unconstitutional and invalid and, therefore, is null and void in law.

Based on the current schedule of briefings on the case, a state Supreme Court ruling on whether to accept a direct review is expected this fall.

Further information
Q&A with Rob McKenna on next steps in capital gains tax lawsuit
Editorials continue to blast new capital gains tax
MEA asks state Supreme Court to ignore voters and open door to income taxes
Judge removes ‘excise tax’ from I-1929 ballot title (capital gains tax repeal)
I-1929 campaign challenges ‘misleading’ AG poll title and summary