Supremes grant stay of cap gains tax ruling
Plus the Legislature's in Olympia and Re-Wire is just around the corner
The Washington Supreme Court granted a stay of a lower court’s ruling that the state’s new capital gains tax is unconstitutional, giving proponents of the tax at least a temporary win in one of the most significant legal fights in many years.
The Supremes are expected to hear arguments on the question early next year.
The practical effect of the order issued Wednesday morning is to allow the Department of Revenue to continue rule-making in aid of collecting the tax next year. If the court finds the 7 percent tax on most capital gains greater than $250,000 constitutional, it would apply to transactions that occurred in 2022.
Douglas County Superior Court Judge Brian Huber ruled the tax unconstitutional under the high court’s long-established precedent that income is property and therefore subject to the constitutional limits on property taxation. The state argues the tax is an excise tax on the transaction itself. If you want to dig into the background, we’ve got you covered.
Attorney General Bob Ferguson’s team has taken the position that the tax is constitutional until and unless the Supremes say otherwise. But opponents of the tax argued that the Department of Revenue was out of bounds to continue preparing to collect the tax, prompting the state to seek a formal stay of Huber’s ruling.
Chief Justice Steven González’s order is brief, saying only that the state’s motion for a stay is granted and that the decision was unanimous. That doesn’t necessarily mean the court’s going to side with the Democratic majorities in the Legislature who passed the tax, but it’s surely not good newsfor the relative handful of rich folks who would pay it.
Lawmakers approved the tax in 2021 in tandem with a massive expansion of state support for child care and other early learning programs. Overturning it could punch a sizable hole in the budget in the coming years.
As we’ve noted before, the court has three main options here: It could affirm the lower court and toss the tax entirely, accept the state’s relatively narrow excise tax argument, or throw out the income-as-property thing entirely. That last option, a long-held goal of progressives who argue that the state’s tax system falls too lightly on the wealthy, would theoretically open the gates for a broad income tax. Public opinion research indicates that would be deeply unpopular outside of a few deep-blue progressive enclaves.
The Legislature is in town…
Lawmakers are back in Olympia this week for the annual round of pre-session committee hearings and other meetings. Pre-COVID, Committee Days was something of a festival of schmoozing and sometimes boozy fundraisers; it wasn’t uncommon to see lawmakers and lobbyists alike looking somewhat worse for wear at morning hearings.
This will be the first truly in-person version since 2019, so it’ll be interesting to see the fundraising reports and lobbying disclosures down the road. Drop a dime, dear readers, should you see or hear anything interesting in that vein. Lawmakers and other elected state officials have until Dec. 10 to raise money before the session freeze on fundraising come down.
The hearing schedule is frequently a good indicator of the issues the Legislature will tackle in January.
Things get rolling this afternoon with the Joint Committee on Energy Supply & Energy Conservation, which is getting briefings from state agencies and power companies on electric vehicle planning. As John Stang noted over at Crosscut this week, the state’s aggressive push for electric vehicle adoption implies a bunch of charging infrastructure — and a not-insignificant amount of electricity — that doesn’t presently exist.
Among the interesting things going on behind the scenes is the jockeying for committee chairs. A wave of retirements and other moves has opened up the top spot on several key panels. Of particular note are Senate Environment, Energy, and Technology, whose current chair, Reuven Carlyle, didn’t seek re-election, and House Environment and Energy, which needs a new chair because Joe Fitzgibbon has ascended to majority leader.
Majority Democrats in the Senate are expected to vote on committee chairs on Thursday; House Democrats are set to choose theirs in a couple of weeks.
We’ll be keeping an eye on all of this stuff. Look for more later in the week and in The Sunday Observer.
There’s still time to sign up for Re-Wire
If you like your politics-and-policy fix in person, there’s still time to sign up for the Re-Wire conference next week in Tacoma. We’ve got panels on housing, energy, post-secondary education, and how the November election went down. We’ll close the day with a cocktail-hour discussion with the leaders of the Legislature’s four caucuses. The proceeds go to hiring a reporter to beef up our coverage of the 2023 session.
Thanks to our sponsors: Amazon, the Group Health Foundation, the Washington Association of Realtors, the College Promise Coalition, and the Northwest Natural Gas Association. If your organization is interested in becoming a sponsor, drop me a line. To register for the conference, click here.
Thanks for your attention. The Morning Wire is the free midweek update from The Washington Observer and the Washington State Wire, which track politics, government, and the influence thereof in Washington State. It’s made possible by the Observer’s paid subscribers. To get access to The Sunday Observer and the warm glow of supporting independent journalism, please consider joining them.
And she’s back…
It does, however, provide some level of clarity for tax accountants like the Woman Who Lets Me Live With Her, who are understandably irked by the uncertainty of this situation.