The capital gains tax approved by state lawmakers has been brought before the Washington State Supreme Court and the state Senate Republican budget leader has expressed concerns about it being factored into state business before the court makes its ruling.
The legislation allowing for the tax, Senate Bill 5096, was signed by Gov. Jay Inslee last year. The bill imposes a 7% tax on assets like stocks, bonds, and business interests over $250,000 in a year, though assets like real estate, livestock, timber, and others, are exempt. The tax is intended to fund early childhood education and child care in the state.
In March, a Douglas County Superior Court judge ruled against the tax, determining it was an income tax, not an excise tax as characterized by the tax’s proponents. Both the courts and voters have ruled against an income tax repeatedly.
Now the state Supreme Court is scheduled to hear oral arguments in the case on Jan. 26. In a release the day the hearing was announced, state Sen. Lynda Wilson, R-Vancouver, questioned why the Washington State Department of Revenue “is acting like the justices have already overruled the lower court, even though the case hasn’t even been argued before them yet.”
In a response to the Citizen Action Defense Fund, a group opposed to the tax, DOR Acting Director John Ryser stated preparation for the tax’s implementation is warranted.
“The department has not taken any actions to enforce the capital gains tax,” Ryser wrote in the response. “Rather, it simply is taking reasonable steps to be prepared to administer the capital gains tax if the Washington Supreme Court reverses the superior court and upholds the tax’s constitutionality.”
Ryser noted information on the department’s website states the guidance provided “will apply only if the tax is ruled constitutional and valid” by the Supreme Court.
In her release, Wilson took issue with the department, which has committed resources to implement a tax that may become moot based on what the court rules.
“(The department) shouldn’t keep spending taxpayer dollars toward collecting a tax that no longer exists. It isn’t justified, and besides, tax collectors should have plenty of other work due to all the other taxes Democrats have imposed in the past several years,” Wilson, the lead Republican in the Senate Ways and Means Committee, stated in the release.
Although the governor is a proponent of the tax, Wilson said Inslee “could and should put the brakes on this unauthorized rule-making.”
“You can’t talk about threats to our democracy then turn around and pretend a court ruling doesn’t exist simply because it goes against your agenda,” Wilson said.
Wilson noted the Citizen Action Defense Fund has petitioned the Legislature’s Joint Administrative Rules Review Committee to intervene. The committee reviews existing and proposed agency rules on whether they apply the intent of state law.
Wilson was joined by all of North Clark County’s representation in the Legislature in voting against the bill allowing for the tax in 2021.
