Author warns of a lawsuit if Legislature approves a capital gains tax

Apr 3, 2019
Written by wpengine

The Legislature should drop its consideration of a capital gains tax or if approved, face a legal challenge, writes Jason Mercier in a Seattle Times op-ed piece.

Mercier, Director of government reform for the Washington Policy Center, makes several points that challenge a Washington capital gains tax.

  • The state constitution bans income taxes
  • The Internal Revenue Service considers capital gains taxes as income taxes
  • Washington voters have rejected 10 straight proposals for income taxes
  • States that impose capital gains taxes do so with their income tax codes
  • California voters elected to restrict the use of capital gains taxes that are unpredictable and therefore unreliable sources of revenue for the state budget
  • The Washington State Commerce Department has warned that a capital gains tax would remove a competitive advantage Washington has over states that charge the tax.

WR opposes taxing proceeds from the sale of personal assets. Such assets often involve the sale of businesses that already had paid numerous taxes in the years they were in operation.

“This head-in-the-sand approach (by the Legislature) will result in an immediate lawsuit to invalidate the tax if it is imposed without first amending the state constitution,” Mercier writes.