In the ongoing backlash against the newly enacted capital gains tax, a second group has filed a lawsuit against the measure. This time around, a group of farmers are making an additional legal claim that undermines arguments that the law is an excise tax and that the tax is either contrary to the state constitution or the U.S. constitution in either case.
“There’s nothing new under the sun when it comes to how Washington lawmakers and state income tax advocates have repeatedly tried to circumvent Washington voters’ rejection of state income tax,” the complaint read. The complaint was filed by the Opportunity For All Coalition (OFAC) on behalf of the plaintiffs. The organization was also involved in an earlier lawsuit against the City of Seattle’s 2017 Income Tax Ordinance, which was ultimately dismissed by the appeals court.
During the legislative period, the legislature enacted the state ESSB 5096 This imposes a seven percent tax on income from sales of long-term capital gains greater than $ 250,000. The Freedom Foundation promptly filed a lawsuit in Douglas County Superior Court because the law violated the state’s unity clause regarding property tax rates. Although proponents claim the bill imposes a consumption tax on sales, the latest complaint states that the bill “admits that capital gains are taxed as income under federal tax laws and most states do not have separate capital gains tax rates”. All states that have capital gains tax classify it as part of income tax.
Proponents have openly stated that the bill is an income tax if they testify during public hearings or give press releases in response to the bill being passed. In addition, Senator Andy Billig (D-3 )’s recent public records reveal discussion points in response to a proposed farm animal exemption. The discussion said, “If farmers and ranchers are able to make more than $ 250,000 in profit each year while working less than half the time, they can afford seven percent on all profits 250,000 US dollars to be paid. “
Former Washington attorney general Rob McKenna wrote in a statement that even if it is considered an excise tax, it violates the dormant trade clause of the U.S. Constitution, which prohibits a state from taxing an activity that is in another tax takes place.
“Whether they call it an income tax or an excise tax, it’s an illegal tax,” McKenna wrote when filing the legal complaint.
To opponents, the tax is little more than a barely disguised effort to bring the case to the Supreme Court in the hope that, for nearly 90 years since 1933, judges will make rulings in which income is considered property under the extreme constitution of the State is declared a broad definition of everything that is “subject to property”.
This definition of real estate was added to the constitution through an amendment in the 1930s to tax income from stocks and bonds as a separate class of real estate as real estate.
Since then, voters have turned down an income tax ten times – no later than 2010. The state Supreme Court also declined to open the 2017 Seattle income tax case, despite state lawmakers urging earlier decisions to be reversed. Legislators also opposed a proposed amendment to ESSB 5096 that would have prohibited Attorney General Bob Ferguson from requiring the court to review income as property.
“The long game here is that they want to defy the will of voters who turned down a state income tax ten times and lay the foundations for a nationwide income tax that would affect most Washington residents,” OFAC President Collin Hathaway said in an opinion. “This legislation deceives and harms Washington taxpayers and businesses of all sizes.”