Nine state Supreme Court justices will hear oral arguments at 9:00am today over the legality of the recently imposed capital gains income tax legislation. The hearing will stream live on TVW.
If the court upholds the capital gains tax, it would be imposed as an income tax on all Washingtonians. This is the 11th attempt to impose an income tax on our state’s residents, three of which were attempts at amending the state’s constitution. The recent state advisory vote in November 2021 made it clear that over 60% of Washington’s residents do not want a capital gains income tax.
Despite a $10 billion budget surplus, lawmakers used an emergency funding clause to pass the tax, denying voters the opportunity to repeal it. The income tax was essentially approved by the judicial branch and Supreme Court, avoiding an inevitable defeat by voters.
Proponents say the tax will affect only 0.2% of the state’s residents—while opening the door as a precursor to a broader income tax on all residents.
Call it what you want, but the IRS and the revenue departments of 49 states view this as an income tax.
A new proposal, SB 5335, would increase the overall capital gains tax rate and include real estate transactions.