When it comes to taxes, whenever the legislature is in session it is important to pay close attention to what is happening. This is especially true when text can magically appear in a title only bill and be quickly voted on in the waning hours of session. Though we all know the risk of tax increases for future economic activity is always possible, so too is the danger of the taxman catching a ride with Doc and Marty on the DeLorean and imposing retroactive tax increases. 

According to the Department of Revenue (DOR), lawmakers have approved several retroactive tax increases in recent years including: 

• SB 6096 (2009);
• 2ESSB 6143 (2010); and
• EHB 2075 (2013).

Beyond being blatantly unfair to change the rules of the tax game after the fact, why are retroactive tax increases poor policy? 

According to the Tax Foundation: 

"In making their decisions, taxpayers must also be able to rely on their reasonable interpretation of the tax law. While the law is always subject to change, taxpayers must have confidence that such changes will apply on a prospective basis only and not be applied retroactively to activities previously undertaken . . . 

Retroactively applied changes in the tax system, whether legislative, regulatory, or interpretive, are a curse to taxpayers, to the strength of the economy, and ultimately to tax policymakers and tax administrators. Whatever short-term gains to the fisc might be reaped from a retroactively applied change in the tax law are surely dwarfed by its broader costs to the fisc and to society as a whole."

The Council on State Taxation also warns: 

"Legislation imposing new or increased tax liabilities attributable to prior periods is fundamentally unfair and in some cases unconstitutional and thus must be avoided. Under no circumstance should legislation imposing new or increased tax liabilities be applied to any periods beginning prior to the date the legislation was enacted.

When a legislative body retroactively changes laws covering time periods for which liability for tax has already legally attached, questions about the stability, reliability, and fairness of the tax system inevitably arise. Taxpayers make significant financial decisions based on the current tax laws; those decisions must not be undermined by legislation imposing new or increased tax liabilities after the fact."

Unfortunately for Washingtonians, our state supreme court has repeatedly ruled that retroactive tax increases are allowed under Washington's constitution (see here and here). 

According to the National Conference of State Legislatures, however, several states prohibit retroactive laws and tax increases. Among the examples from NCSL: 

• Texas Constitution: Article 1, Section 16 - "No bill of attainder, ex post facto law, retroactive law, or any law impairing the obligation of contracts, shall be made."
   
• Georgia Constitution: Article 1, Section 1 (Paragraph X) - "No bill of attainder, ex post facto law, retroactive law, or laws impairing the obligation of contract or making irrevocable grant of special privileges or immunities shall be passed."
   
• Ohio Constitution: Article 2, Section 28 - "The general assembly shall have no power to pass retroactive laws, or laws impairing the obligation of contracts; but may, by general laws, authorize courts to carry into effect, upon such terms as shall be just and equitable, the manifest intention of parties, and officers, by curing omissions, defects, and errors, in instruments and proceedings, arising out of their want of conformity with the laws of this state."

While Washington's constitution has similar language banning ex post facto laws in Article 1, Section 23, that hasn't stopped lawmakers from passing or the court upholding retroactive tax increases. More explicit language banning retroactive tax increases is needed. Among the long list of things for the 2017 Legislature to address, lawmakers should also send voters a constitutional amendment to make it clear you can't go back in time to raise taxes retroactively in Washington.