WA court rules capital gains tax unconstitutional
By Terry Murry on Thursday, March 3rd, 2022 in Columbia Basin News More Top Stories
DOUGLAS COUNTY – A new capital gains tax passed last year by the Washington Legislature’s Democrat majority violates Washington’s constitution, according to an Eastern Washington judge who ruled it invalid Tuesday. But the fight against the tax may not be over.
Douglas County Superior Court Judge Brian Huber ruled the capital gains legislation “is property characterized as an income tax… rather than an excise tax as argued by the state.”
House Republican Finance Leader Ed Orcutt (R-Kalama) said Republicans warned Democrats the tax is unnecessary, unpopular, and likely unconstitutional, but they passed it. Orcutt said the court ruling is not the final word.
“I don’t think this stops them,” he said. “And that’s the problem, is I don’t know that they’re going to take no for an answer.”
Attorney General Bob Ferguson confirmed Tuesday that he will appeal.
“There’s a great deal at stake in this case, including funding for early learning, childcare programs, and school construction,” Ferguson said. “Consequently, we will continue defending this law enacted by the peoples’ representatives in the Legislature. All the parties recognize this case will ultimately be decided by the State Supreme Court. We respectfully disagree with this ruling, and we will appeal.”
According to Ferguson’s office, Senate Bill 5096, which Gov. Jay Inslee signed into law in May of last year, applies to the sale of assets like stocks and bonds where a person receives capital gains exceeding $250,000 during the year. For example, if a person bought stock for $100,000 and sold it 10 years later for $400,000, they would have a capital gain of $300,000. The first $250,000 of that amount would be exempt from tax, so the person would owe the seven percent tax rate only on the remaining $50,000 in gains, for a total tax payment of $3,500 on the $400,000 sale. The tax does not apply to some assets, including retirement accounts, sales of real estate (including homes and farmland), livestock, timberlands, and qualified small businesses.
