After the legislature passed Gov. Inslee's desired capital gains tax in 2021, it came under scrutiny by attorneys and opponents who said it was actually an income tax.

 Now the case will go before State Supreme Court

Earlier this year, a Douglas County Superior Court Judge, Bruce Huber, ruled that the tax (which only applies to gains over $250K) is in fact an income tax. Even the IRS considers capital gains as a form of income.  Capital gains come from the sale of stocks, investments, and other large-ticket items (such as a boat). They are considered income. however, Inslee and legislative Democrats tried to spin it differently.

It was a significant political setback for Inslee, who wanted such a tax since he came into office.  Washington State Attorney General Bob Ferguson asked the high court to take the case, and Wednesday it was announced they would.

The Washington State Constitution bans any form of income tax, and it has been rejected by voters a number of times. That's why Inslee-spurred Democrats passed it in the legislative session, despite credible evidence it's illegal.

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The Freedom Foundation released a statement about the Court's actions on Wednesday, from Eric Stahlfeld, who is the Chief Litigation Counsel for the Foundation that read in part:

“Despite a century of court rulings recognizing that our state constitution requires taxes on income to be equally applied and can’t exceed one percent without voter approval, Attorney General Ferguson and the state legislative majority are brazenly attempting to impose a selective capital gains income tax on Washington entrepreneurs.”

“The state enacted this illegal tax in 2021 knowing every step of the way that it was an intentional attempt to circumvent the state constitution,” concluded Stahlfeld. “But the constitution hasn’t been amended, the law is still the law, and the Freedom Foundation is confident the Supreme Court will again strike down this latest punitive tax scheme by greedy politicians in Olympia.” ( permission from the FF).

The Foundation, and other groups, have been fighting against the tax ever since it was passed. No timetable has yet been given for when the Court will rule on this.

 

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