An expert on Wash­ing­ton state courts, the late Charles H. Shel­don, once described the Wash­ing­ton State Supreme Court as a pas­sive, but nonethe­less polit­i­cal body. “Courts are polit­i­cal agen­cies because they author­i­ta­tive­ly allo­cate val­ues among mem­bers of soci­ety,” Shel­don advanced in his text, A Cen­tu­ry of Judg­ing: A Polit­i­cal His­to­ry of the Wash­ing­ton Supreme Court (1988).

“The judges of the state’s court of last resort, wit­ting­ly or unwit­ting­ly, have been mak­ing pub­lic policy.” 

This process was high­light­ed last month as the Court heard oral argu­ment in the chal­lenge to the state’s cap­i­tal gains tax on the wealthy, which pit the State against a col­lec­tion of indi­vid­u­als and trade asso­ci­a­tions (the Quinn plain­tiffs) that allege their mem­bers will be sub­ject to, and unlaw­ful­ly harmed by, the tax. 

Often, it is dif­fi­cult to judge the out­come of a case based on oral argu­ment because the observ­er can­not deter­mine if the jus­tices’ inquiries come from a place of con­vic­tion, or intel­lec­tu­al exploration. 

While it is com­mon for advo­cates to be sub­ject to ques­tions by the jus­tices soon after their intro­duc­tion, the vig­or of the ini­tial ques­tion­ing of Solic­i­tor Gen­er­al Noah Pur­cell, par­tic­u­lar­ly by Jus­tice Sheryl Gor­don McCloud, pre­vent­ed him from doing much more than repeat the points made by the State in its briefs as to why the cap­i­tal gains tax is an excise tax. 

That the Solic­i­tor Gen­er­al was unable to pro­vide deep­er illu­mi­na­tion of the State’s argu­ment was detri­men­tal to its case, as there was some­thing about its argu­ment that did not appear to ful­ly click with the jus­tices. How­ev­er, the Solic­i­tor Gen­er­al was able to make up for this in part dur­ing his rebut­tal at the end of argument.

But, for most of the jus­tices, their ques­tions appeared to stem from explo­ration, and it is uncer­tain how most of the Court will decide this case. 

Jus­tice McCloud’s col­lo­qui­es with the Solic­i­tor Gen­er­al, to con­trast, point to the con­clu­sion that she will vote to decide that the cap­i­tal gains tax is an income tax.

How­ev­er, it won’t be clear until the Court pub­lish­es its deci­sion whether her ques­tion­ing was to per­suade the Court to decide that it is required to address its prece­dent in Cul­li­ton v. Chase — a 1933 opin­ion which, infused with the right-wing judi­cial views of the era, deter­mined that a tax on per­son­al income is a prop­er­ty tax — and over­turn it, or to dis­pose of the cap­i­tal gains tax altogether. 

If the Court does the for­mer, it is prob­a­bly bet­ter both doc­tri­nal­ly and for our state than to sim­ply uphold the tax as an excise tax. And, the jus­tices’ con­cep­tion of judi­cial restraint will cau­tion them from reach­ing the Cul­li­ton ques­tion if they can instead find for the cap­i­tal gains tax on these grounds. 

But, if this does occur, there is an aspect of the Court reject­ing the State’s argu­ment that would be broad­ly unfortunate. 

As explained in the ami­cus brief of law pro­fes­sors sub­mit­ted in sup­port of uphold­ing the tax, pri­or to the Lochn­er era, leg­is­la­tures were accord­ed broad dis­cre­tion in how they clas­si­fied the tax­es they levied for the com­mon good.

Dur­ing this era (named for the 1905 case Lochn­er v. New York, the now-dis­cred­it­ed U.S. Supreme Court deci­sion in which the Court found that states were pro­hib­it­ed from lim­it­ing the work­ing hours of bak­ers for health and safe­ty rea­sons), many right-wing judges imposed their own ideas of immutable nat­ur­al law to lim­it the dis­cre­tion of state leg­is­la­tures in pro­vid­ing for the health, safe­ty, and well-being of their res­i­dents. Cul­li­ton was one such decision. 

Yet, even in the con­strained idea of leg­isla­tive pow­er that emerged in this peri­od, the Wash­ing­ton Supreme Court found, in an opin­ion issued the same day as its deci­sion in Cul­li­ton, that the leg­is­la­ture can use the receipt of income to cal­cu­late the amount of an excise tax, a con­trary posi­tion to that which forms many of the chal­lengers’ claims.

Here, the leg­is­la­ture has decid­ed that it is appro­pri­ate for the state to tax the trans­fer of cap­i­tal assets, a type of trans­fer the Court has pre­vi­ous­ly deter­mined in oth­er con­texts is not a tax on the prop­er­ty itself. 

The leg­is­la­ture has also deter­mined that the way the tax should be mea­sured is by the gains rec­og­nized upon the trans­fer of those assets — which is a lim­it­ed tax more favor­able to its pay­ers than, say, also tax­ing their losses. 

In the words of the law pro­fes­sors’ brief, for the Court to find against the cap­i­tal gains tax because of this struc­ture would extend Cul­li­ton “far beyond its hold­ing and [] dis­re­gard the Court’s exten­sive excise tax precedents.” 

To add to this con­clu­sion, such a deci­sion would sub­sti­tute a leg­isla­tive deter­mi­na­tion as to the most effi­cient and func­tion­al way to admin­is­ter the assess­ment of the tax with the Court’s own. Even if the Court were to ren­der the dis­tinc­tion between the clas­si­fi­ca­tion of the tax­es most­ly moot by declar­ing that income tax­es are con­sti­tu­tion­al­ly per­mis­si­ble, its rejec­tion of the cap­i­tal gains tax as an excise tax would be a sad skep­ti­cism of nuance (nuance that was neces­si­tat­ed in many ways by Court and fed­er­al prece­dent) and the dis­cre­tion of a leg­isla­tive body to craft eco­nom­ic leg­is­la­tion in the pub­lic interest. 

Paci­fi­ca Law Group’s Paul Lawrence, a Lynn Allen Award hon­oree who rep­re­sent­ed indi­vid­ual edu­ca­tors, the Edmonds School Dis­trict, and the Wash­ing­ton Edu­ca­tion Asso­ci­a­tion argued that Cul­li­ton should be over­turned if the Court decides that the cap­i­tal gains tax on the wealthy enact­ed through ESSB 5096 is an income tax. 

Lawrence ably demon­strat­ed Cul­li­ton’s shaky under­pin­nings and the con­tor­tions that judges have gone through to jus­ti­fy or strike down cer­tain tax­es. While done in ser­vice of over­turn­ing the income-tax-as-prop­er­ty-tax line of cas­es, he showed how the dis­tinc­tion between an excise tax or income tax has been large­ly based on the dis­po­si­tion of the jus­tices, empha­siz­ing the Court’s pre­vi­ous treat­ment of tax­es on the gross income of busi­ness­es and on the income of state employ­ees as excise tax­es. Both tax­es use income as the method of measurement.

Lawrence’s argu­ment under­cut an immutabil­i­ty about the nature of the tax­es that appeared accept­ed, or at least not pub­licly inter­ro­gat­ed, by many of the justices.

Lawrence demon­strat­ed that it is a judi­cial choice to empha­size or down­play cer­tain aspects of the tax­es brought before the Court. 

Only Jus­tice Raquel Mon­toya-Lewis appeared to sug­gest that these def­i­n­i­tions aren’t “sta­t­ic” when ques­tion­ing the coun­sel for some of the plain­tiffs, a ques­tion for­mer Attor­ney Gen­er­al Rob McKen­na tried to answer even as he bar­reled through oth­er attempts at ques­tions by the justices.

McKen­na’s co-coun­sel Cal­lie Castil­lo spent the bulk of her time argu­ing against the tax on the grounds that it vio­lates the Dor­mant Com­merce Clause, a set of jurispru­dence that has become an implied pro­vi­sion of the U.S. Constitution. 

Fea­tur­ing this argu­ment, which came before McKenna’s, was odd, because, as the Solic­i­tor Gen­er­al stat­ed in his rebut­tal, no oth­er state’s cap­i­tal gains tax has been found uncon­sti­tu­tion­al under this doctrine. 

The U.S. Supreme Court has long found it per­mis­si­ble to tax intan­gi­ble prop­er­ty based on the res­i­dence of the indi­vid­ual. To this, I’ll main­tain that the plain­tiffs’ argu­ment seems to be an attempt to either mud­dy the issue using fed­er­al law or jump over the Wash­ing­ton Supreme Court and try to use the cur­rent right-wing major­i­ty on the U.S. Supreme Court as a vehi­cle to lim­it such tax­es more broadly. 

There will like­ly be much time yet to try to divine the mean­ing of the pro­ceed­ings for the jus­tices’ ulti­mate deci­sion. While the Solic­i­tor Gen­er­al request­ed that the Court expe­dite their deci­sion and release it before the end of the leg­isla­tive ses­sion, because of poten­tial impacts to the bud­get, the Court is under no oblig­a­tion to do so and has already stayed the tri­al court’s deci­sion in favor of the Quinn plain­tiffs, allow­ing the Depart­ment of Rev­enue to move for­ward, as Jus­tice Mad­sen point­ed out just before the end of oral argument.

How­ev­er long it takes, until the deci­sion is pub­lished it will be unclear which pol­i­cy the jus­tices will make when they define the law; but, it will be pol­i­cy, regardless.

Editor’s Note: NPI alum Patrick Stick­ney is an attor­ney and res­i­dent of Taco­ma. All views are his own and do not nec­es­sar­i­ly reflect those of any orga­ni­za­tion with which he is affiliated.​