WSJ: Washington state’s new capital-gains tax falls afoul of federal law
In Washington state, there’s been a controversial move regarding taxation.
The state constitution caps income tax at 1%. However, aiming to circumvent this restriction, the Democratic leadership, including Gov. Jay Inslee, introduced a 7% tax on capital gains over $250,000 from specific asset sales, even those out of state.
Rather than labeling it as an income tax, it was termed an ‘excise tax’ on transactions. While this rebranding was approved by the state Supreme Court, it clashes with federal law and poses the question of what states can tax beyond their boundaries.
“The Justices will soon decide whether to hear Quinn v. Washington, a taxpayer challenge to the state’s excise shenanigan. Washington doesn’t have a progressive income tax, because the state constitution forbids it. As the petitioners explain in their brief, any such tax must be “uniform and capped at 1%,” meaning higher earners “cannot be made to pay more as a percentage of their income.”
Just because Washington’s Supreme Court gave it a thumbs-up doesn’t make it right. The U.S. Supreme Court should recognize this for the constitutional evasion that it is.