Washington Supreme Court to decide capital gains tax case
The Washington Supreme Court has agreed to review a lower court ruling that struck down a new capital gains tax on stocks, bonds and other high-yielding assets.
Attorney General Bob Ferguson appealed the March ruling directly to the state Supreme Court, and the court order on Wednesday means the case will be decided by the High Court instead of going to court first. court of Appeal. The date for the pleadings has not yet been set.
The measure – approved by the Washington Legislature last year – imposed a 7% tax on the sale of stocks, bonds and other high-end assets over $250,000 for individuals and couples. It was expected to bring in $415 million in 2023, the first year the state would see the tax money.
In his written ruling in March, Douglas County Superior Court Judge Brian Huber agreed with opponents of the new tax who had argued it was an income tax that violates previous state Supreme Court rulings and the state constitution because it is not a flat tax on property. Proponents had argued that the tax was an excise tax and therefore constitutional.
Huber cited several elements of the law that he said “show the characteristics of an income tax rather than an excise tax,” including reliance on federal IRS tax returns that must be produced by residents of Washington, the fact that it is levied annually instead of at the time of the transaction, and that it is based on an aggregate calculation of capital gains during a year.
The legal challenge stems from two lawsuits that were later consolidated. The first was filed last April by The Freedom Foundation, an Olympia-based conservative think tank. A month later, former Washington Attorney General Rob McKenna filed the second on behalf of state residents, including manufacturing business owners, investors and the Washington State Farm Bureau.
Proponents of the tax say Washington — one of the few states that does not impose a payroll tax — relies too heavily on its sales tax, disproportionately affecting those with lower incomes.