Judge
rules capital gains income tax is unconstitutional
By JASON MERCIER | BLOG
By Jason Mercier Mar 1, 2022
If only someone had warned lawmakers that the IRS and every other state in
the country unequivocally say a capital gains tax
is an income tax. Perhaps they’ll pay attention now that the courts have
said the same. The Douglas County Superior Court ruled today that capital gains
income tax is unconstitutional. From the judge’s ruling:
"ESSB 5096 is properly characterized as an income tax
pursuant to Culliton, Jensen, Power and other applicable Washington caselaw,
rather than as an excise tax as argued by the State. As a tax on the receipt of
income, ESSB 5096 is also properly characterized as a tax on property pursuant
to that same caselaw. This Court concludes that ESSB 5096 violates the
uniformity and limitation requirements of article VII, sections 1 and 2 of the
Washington State Constitution. It violates the uniformity requirement by
imposing a 7% tax on an individual's long-term capital gains exceeding $250,000
but imposing zero tax on capital gains below that $250,000 threshold. It
violates the limitation requirement because the 7% tax exceeds the 1% maximum
annual property tax rate of 1%."
Former Attorney General Rob McKenna (one of the attorneys for
the plaintiffs) told me about the ruling:
“This is not the first time a Washington court has rejected an
attempt by the legislature to enact an unconstitutional income tax by labeling
it an ‘excise tax.’ We appreciate Judge Huber’s careful consideration of those
precedents in reaching a similar result in this case.”
As the state Supreme Court reminded lawmakers in 1960, the
proper way to impose a graduated income tax is with a constitutional amendment.
It is past time to stop playing tax word games in an attempt to circumvent the voters’ consistent opposition to income
taxes.
A capital gains income tax is unconstitutional in Washington.
Full stop.
LISTEN: Jason Mercier talking income
tax ruling win with John Carlson on KVI
