Douglas County Courthouse in Waterville
Douglas County Courthouse in Waterville

A group of indi­vid­u­als opposed to Wash­ing­ton State’s new state cap­i­tal gains tax on the wealthy have pre­vailed in the ini­tial round of their legal chal­lenge, obtain­ing a rul­ing declar­ing the tax to be uncon­sti­tu­tion­al from Dou­glas Coun­ty Supe­ri­or Court Judge Bri­an Huber, who they select­ed to hear their lawsuit.

Rep­re­sent­ed by for­mer Attor­ney Gen­er­al Rob McKen­na, the group — known as the Quinn plain­tiffs for short — is com­posed of folks who are adamant­ly opposed to rebal­anc­ing Wash­ing­ton State’s tax code and requir­ing the wealthy to pay their fair share in dues to secure the future of our great state.

Wash­ing­ton’s new state cap­i­tal gains tax on the wealthy, which would be paid by only a few thou­sand of the rich­est house­holds in the state, is one of the first seri­ous steps ever tak­en to address Wash­ing­ton’s worst-in-the-nation, upside down tax code. Leg­is­la­tors made sure when devel­op­ing it to exempt fam­i­ly farms, all real estate, and retire­ment accounts. There’s also a small busi­ness exemp­tion. It is a tax that the vast major­i­ty of Wash­ing­to­ni­ans will nev­er pay.

But among those Wash­ing­to­ni­ans who would pay it are some who real­ly, real­ly, real­ly don’t want to pay. And they are backed by oth­er right wing Repub­li­cans who would­n’t have to pay the tax them­selves, but nev­er­the­less object to the idea of requir­ing the wealthy to do their part to secure our state’s future by invest­ing in child­care, K‑12 pub­lic schools, and ear­ly learning.

Cur­rent­ly, the wealthy denizens of Wash­ing­ton State pay only up to 3% of their income in state and local tax­es, where­as the low­est income Wash­ing­to­ni­ans pay up to 17–18% of their income in state and local taxes.

That’s because Wash­ing­ton bare­ly tax­es wealth at all, instead rais­ing fund­ing for its pub­lic ser­vices through tax­es on things peo­ple buy (the sales tax) and on the homes peo­ple own (the prop­er­ty tax). The state’s new tax on cap­i­tal gains is the first mean­ing­ful action tak­en in decades to cor­rect this imbal­ance and require the wealthy to con­tribute a bit more towards Wash­ing­ton’s com­mon wealth.

Repub­li­cans vot­ed against the cap­i­tal gains tax in the Leg­is­la­ture, but lost, much to their dis­may. Now they’re hop­ing to nix the tax through this lawsuit.

The Quinn plain­tiffs argue that the state’s new cap­i­tal gains tax can’t be con­sti­tu­tion­al because the cap­i­tal gains tax is real­ly an income tax and the State Supreme Court has pre­vi­ous­ly ruled (all the way back in the 1930s!) that income is prop­er­ty and can only be taxed at a uni­form rate. The State of Wash­ing­ton says that the cap­i­tal gains tax is struc­tured as an excise tax, like the state’s estate tax, and holds up to con­sti­tu­tion­al scruti­ny with­out a problem.

In his rul­ing today, Judge Huber agreed with the plain­tiffs’ view of the state cap­i­tal gains tax’s legal­i­ty, adopt­ing some of their legal rea­son­ing in a let­ter to the par­ties, although not reach­ing all of their argu­ments. The leg­is­la­tion that cre­at­ed the state cap­i­tal gains tax on the wealthy, Engrossed Sub­sti­tute Sen­ate Bill 5096 in 2021, is referred to as ESSB 5096 through­out Huber’s ruling.

“ESSB 5096 is prop­er­ly char­ac­ter­ized as an income tax pur­suant to Cul­li­ton, Jensen, Pow­er and oth­er applic­a­ble Wash­ing­ton caselaw, rather than as an excise tax as argued by the State,” Huber wrote in his letter.

“As a tax on the receipt of income, ESSB 5096 is also prop­er­ly char­ac­ter­ized as a tax on prop­er­ly pur­suant to that same caselaw.”

“This Court con­cludes that ESSB 5096 vio­lates the uni­for­mi­ty and lim­i­ta­tion require­ments of arti­cle VII, sec­tions 1 and 2 of the Wash­ing­ton State Con­sti­tu­tion. It vio­lates the uni­for­mi­ty require­ment by impos­ing a 7% tax on an indi­vid­u­al’s long-term cap­i­tal gains exceed­ing $250,000 but impos­ing zero tax on cap­i­tal gains below that $250,000 thresh­old. It vio­lates the lim­i­ta­tion require­ment because the 7% tax exceeds the 1% max­i­mum annu­al prop­er­ty tax rate of 1%.”

Huber’s full rul­ing is avail­able from our State Cap­i­tal Gains Tax Lit­i­ga­tion Resource Cen­ter, which has an archive of case files that is free of right wing propaganda.

Many legal observers and sup­port­ers of the state cap­i­tal gains tax had expect­ed Huber to rule for the Quinn plain­tiffs, and he ful­filled their expec­ta­tions today. Dou­glas Coun­ty Supe­ri­or Court does­n’t usu­al­ly hear con­sti­tu­tion­al chal­lenges, but in this case it did because the plain­tiffs went venue shop­ping, look­ing for a sym­pa­thet­ic judge who might rule in their favor in the ini­tial round of litigation.

Attor­ney Gen­er­al Bob Fer­gu­son, whose office is respon­si­ble for the defense of ESSB 5096, respond­ed quick­ly to the release of the rul­ing, promis­ing an appeal.

Said Fer­gu­son:

“There’s a great deal at stake in this case, includ­ing fund­ing for ear­ly learn­ing, child care pro­grams, and school con­struc­tion. 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.”

The Supreme Court, as its name implies, will have the final ver­dict in this case. Should the Supreme Court reverse Huber, the state cap­i­tal gains tax would stand.

That’s an out­come that many on the right wing fear is like­ly, includ­ing dis­graced ini­tia­tive pro­mot­er Tim Eyman. Eyman, State Rep­re­sen­ta­tive Jim Walsh, and oth­ers would like to over­turn the cap­i­tal gains tax through an ini­tia­tive instead.

Last year, they tried to drum up inter­est in such a scheme, but could­n’t find wealthy bene­fac­tors will­ing to under­write a sig­na­ture dri­ve.

Our polling has repeat­ed­ly found a state cap­i­tal gains tax on the wealthy to be pop­u­lar with Wash­ing­ton vot­ers. We were curi­ous how the pub­lic might respond to an ini­tia­tive from Eyman and Walsh to not only repeal the cap­i­tal gains tax, but also ban income tax­es. So, in one of our statewide polls last year, we read one of Eyman and Wal­sh’s bal­lot titles to vot­ers and asked peo­ple to say how they’d vote. The bal­lot title polled dread­ful­ly, with just 40% say­ing they’d vote yes.

Here’s the ques­tion we asked and the respons­es we received:

QUESTION: In Novem­ber of 2022, there may be an ini­tia­tive on the statewide bal­lot con­cern­ing state, coun­ty, and city tax­es. The offi­cial descrip­tion is as fol­lows: This mea­sure would pro­hib­it the state, coun­ties, and cities from impos­ing or col­lect­ing tax­es it describes as “based on per­son­al income,” and repeal a tax on cer­tain sales of long-term cap­i­tal assets. If the elec­tion were being held today, would you def­i­nite­ly vote yes in favor, prob­a­bly vote yes in favor, prob­a­bly vote no against, or def­i­nite­ly vote no against this initiative?


  • Would vote yes: 40% 
    • Would def­i­nite­ly vote yes: 28%
    • Would prob­a­bly vote yes: 12%
  • Would vote no: 34% 
    • Would prob­a­bly vote no: 15%
    • Would def­i­nite­ly vote no: 19%
  • Unde­cid­ed: 25%

Our sur­vey of 909 like­ly 2022 Wash­ing­ton State vot­ers was in the field from Wednes­day, Novem­ber 10th through Thurs­day, Novem­ber 11th, 2021.

It uti­lizes a blend­ed method­ol­o­gy, with auto­mat­ed phone calls to land­lines (50%) and text mes­sage answers from cell phone only respon­dents (50%).

The poll was con­duct­ed by Pub­lic Pol­i­cy Polling for the North­west Pro­gres­sive Insti­tute and has a mar­gin of error of +/- 3.3% at the 95% con­fi­dence interval.

More infor­ma­tion about the survey’s method­ol­o­gy is avail­able here.

Last spring, in anoth­er sur­vey, we asked like­ly 2022 Wash­ing­ton vot­ers if they sup­port­ed or opposed our new state cap­i­tal gains tax on the wealthy after pre­sent­ing argu­ments for and against it. We test­ed Rob McKen­na and Tim Eyman’s argu­ments against our own. Our argu­ments pre­vailed. You can read the ques­tion we asked, the respons­es, and our analy­sis in this post from last autumn.

It’s no doubt frus­trat­ing for Repub­li­cans to hear this, but the idea of levy­ing a state cap­i­tal gains tax on the wealthy is an idea that most vot­ers sup­port, even after hear­ing Repub­li­cans’ strongest argu­ments. This has con­sis­tent­ly been the case over the span of more than half a decade. There’s no appetite among the elec­torate for a bal­lot mea­sure to over­turn ESSB 5096. Should wealthy Repub­li­cans bankroll one, they would be mak­ing a risky investment.

Why not just pay the tax? It’s ded­i­cat­ed to the Edu­ca­tion Lega­cy Trust! Sure­ly even those with bil­lion­aire for­tunes can appre­ci­ate the return on invest­ment of pro­vid­ing child­care, ear­ly learn­ing, and an amply fund­ed edu­ca­tion to our youth.

About the author

Andrew Villeneuve is the founder and executive director of the Northwest Progressive Institute, as well as the founder of NPI's sibling, the Northwest Progressive Foundation. He has worked to advance progressive causes for over two decades as a strategist, speaker, author, and organizer. Andrew is also a cybersecurity expert, a veteran facilitator, a delegate to the Washington State Democratic Central Committee, and a member of the Climate Reality Leadership Corps.

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