The Capital Gains Tax, approved by the legislature and signed by the governor, was challenged and overturned by the Douglas County Superior Court. While oral arguments are scheduled to begin on January 26, 2023, the Washington State Supreme Court issued a “stay” on the lower court ruling yesterday, meaning the state can begin issuing rules and start the process for collection before next year’s tax due date.
WR strongly encourages the court to uphold the Douglas County Court decision that the tax is unconstitutional and cannot be collected by the state.
The tax is scheduled to take effect in April 2023. The State Department of Revenue has been busy preparing to collect the tax if it is upheld as constitutional, while other efforts are underway to prevent the DOR from collecting the tax until the Supreme Court rules. It is uncertain whether the Supreme Court will rule in time to prevent the state from attempting to collect the tax. Additionally, steps are in motion to allow the state to collect it even if the Supreme Court hasn’t ruled by April.
WR opposes the Capital Gains Tax because it is unconstitutional and an income tax—forbidden in our state—and because the tax will severely impact small retailers that choose to sell their businesses when they retire. The tax is 7% of everything above $250,000. For many retailers and small business owners, the business is their retirement. They have poured their blood, sweat, and tears into making their business worth something in hopes of one day selling and making a profit so they can live out their golden years. They have already been paying property taxes, payroll taxes, business and occupation taxes, and collecting the state sales tax. It is fundamentally wrong to now ask them to pay an additional 7% on their retirement.
Additionally, there is some discussion that the case may even be headed to the U.S. Supreme Court as there are potential Commerce Clause implications with taxing folks from other states.
WR will continue to support efforts by the Opportunities for All Coalition to nullify this illegal and misguided tax.