BIAW, Retailers join groups supporting the capital gains income tax challenge before Supreme Court

December 12, 2022

BIAW and the Washington Retail Association (WRA) joined several other groups today in supporting the capital gains income tax challenge case before the Washington State Supreme Court.

The associations’ amicus brief presents the viewpoints of thousands of family business owners in Washington who will be harmed if the lower court’s ruling on the state’s new capital gains tax is reversed.

“[The tax] will discourage entrepreneurs and out-of-state companies from forming new businesses in our state,” the brief says. “No rational business owner wants to operate in an environment of legal uncertainty, under a … Legislature that ignores constitutional limits on its power.”

Other groups support capital gains income tax challenge

BIAW and WRA aren’t the only groups with an interest in overturning the unconstitutional tax.

Washington Policy Center also joined an amicus brief filed by the National Tax Economists and Policy Analysts, National Taxpayers Union Foundation, Tax Foundation, and several academic experts.

These groups represent the viewpoints of organizations with decades of expertise in tax and economic policy.

“For almost 100 years, income taxes have been unconstitutional in the state of Washington,” their brief says. “Ballot measures to allow for an income tax have been rejected by voters in 1934, 1936, 1938, 1942, 1944, 1970, 1973, 1975, 1982, and 2010.”

“To circumnavigate this constitutional command, the Legislature in 2021 imposed what it calls an excise tax on capital gains income,” the brief continues. “Respondents challenged this as an income-tax-in-disguise. The Superior Court below determined this tax to be an income tax and thus unconstitutional.”

Lower court ruled tax unconstitutional

In a March 1 ruling on Quinn v. State of Washington in Douglas County Superior Court, Judge Brian Huber invalidated the new tax as unconstitutional. BIAW and the Washington Cattlemen’s Association filed an amicus brief in the lower court case.

In his ruling, Huber agreed with the plaintiff’s assessment that “ESSB 5096 is properly characterized as an income tax…” and deemed it unconstitutional.

The Washington State Supreme Court has scheduled arguments in the case for January 26, 2023.