Chris Cargill: State income tax adopted by one-vote margin – let the lawsuits begin

Ignoring the will of voters – expressed 10 times – and recent polls that show strong opposition, a slim majority of the Washington state Legislature this legislative session passed an unpopular new state income tax.

The legislation was signed into law by Gov. Jay Inslee at a special ceremony on May 4. It imposes an income tax on capital gains to start, while supporters contend it is “just the beginning.” There was bipartisan opposition to an income tax in the Legislature, but Democratic leaders passed it by a margin of one vote. Now, the lawsuits begin.

Why the instant court challenge? Washington state’s constitution is clear: Because your income is your property, it must be taxed uniformly. That’s why the state Supreme Court has said time and time again that a graduated income tax is prohibited in this state. State lawmakers know this. They want a court fight, hoping that just five justices will do what they and the voters have been unwilling to do.

In a 2018 email to a constituent, Senator Jamie Pederson of Seattle said the goal of a lawsuit was to “give the Supreme Court the opportunity to revisit its bad decisions from 1934 and 1951 that income is property and will make it possible, if we succeed, to enact a progressive income tax with a simple majority vote.” This means an income tax, for everyone. The only people who don’t believe are those who think the federal income tax is still 1%, where it started in 1913.

Lawmakers are going to get their lawsuit. In fact, they’re going to get two. The Freedom Foundation and the Opportunity for All Coalition have both announced lawsuits. Because legislative action is considered the will of the people, the burden of paying for the defense of the new income tax falls on taxpayers.

The bill the governor signed will levy a 7% tax on the capital gains from sales of assets that exceed $250,000. It is likely farmers will be affected. History tells us the income tax will be extended to more people and more income year after year.

Supporters said their goal was to fix Washington’s regressive tax structure. Tellingly, they removed efforts to link passage and revenue from the income tax to lowering taxes elsewhere. The income tax bill provides no tax relief to anyone.

Perhaps most disturbing in this fight was the push by lawmakers during the legislative session to prevent the public from having a say on the income tax. Legislators inserted a stealth “emergency” clause on the bill which prevents citizens from filing a referendum. They also rejected numerous amendments to allow citizens to vote on it. Supporters of an income tax know voters don’t want what they are selling, so they had to prevent voters from having the final say.

And it’s not just a state income tax. Lawmakers also rejected an effort to ban local income taxes. This is part of the reason Spokane, Spokane Valley and Granger have passed their own local income tax bans – sending a clear message to the state that those areas will never have a local income tax.

It would make sense for more cities to do the same, or risk losing yet another competitive advantage. The Spokane city income tax ban passed with more than 70% of the vote in November 2019.

Over the past several years, states like Texas and Tennessee have strengthened their bans on a state income tax. This year, Idaho and West Virginia considered bills to lower or eliminate their state income taxes altogether. Washington is the only state moving in the opposite direction – imposing a new state income tax, at any cost. Lawmakers ignored the voters and passed the income tax anyway.

Now, our state has lost one of its great competitive advantages, taxpayers are saddled with an unpopular, unconstitutional law, and they must pay to defend it.

Let the court battle begin.

Chris Cargill is the Eastern Washington director of Washington Policy Center, an independent research organization with offices in Spokane, Seattle, Tri-Cities and Olympia. Online at washingtonpolicy.org.