Washington Supreme Court could not directly rule on capital gains income tax
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Conventional wisdom has been that the Washington State Supreme Court will be the final arbiter of the constitutionality of the controversial state capital gains income tax that was passed by the legislature and signed into law by Gov. Jay Inslee last year.
Attorney General Bob Ferguson, whose office led the state’s case defending the tax against a lawsuit, said as much in response to Tuesday afternoon’s ruling by Douglas County Superior Court Judge Brian Huber that the tax is unconstitutional.
“There’s a great deal at stake in this case, including funding for early learning, child care programs, and school construction,” he said in a press release. “Consequently, we will continue defending this law enacted by the peoples’ representatives in the Legislature. All the parties recognize this case will ultimately be decided by the State Supreme Court. We respectfully disagree with this ruling, and we will appeal.”
But what if the state Supreme Court never rules on the tax?
That’s at least a possibility, according to Jason Mercier, director of the Center for Government Reform at the Washington Policy Center think tank.
“Well, let me respectfully disagree with the attorney general about it’s a guarantee this is going to the state Supreme Court,” Mercier told host John Carlson during Wednesday’s “Commute with Carlson” radio show on KVI.
Mercier’s involvement in the lawsuit includes an on-the-record capital gains income tax declaration, with supporting correspondence with the Internal Revenue Service and state revenue departments from across the country describing all capital gains as income.
“It’s more likely than not this is going to the state Supreme Court,” Mercier conceded. “But there’s a pretty good chance it won’t, and that is if this goes to the Court of Appeals.”
Direct review of state Superior Court decisions is granted in limited circumstances.
“If it doesn’t do direct review and the Court of Appeals rules just like the Superior Court did, then you’ll have had court after court after court for 100 years saying the same thing: there’s no controversy,” Mercier said. “There’s nothing for the Supreme Court to take up.”
As an example, Mercier pointed to the state Supreme Court in April 2020 refusing to hear Seattle’s appeal regarding the city’s graduated income tax ordinance previously struck down by both the King County Superior Court and the Washington State Division 1 of the Court of Appeals.
Hugh Spitzer, law professor at the University of Washington, offered a little more detail on what’s next in legal process regarding the capital gains income tax.
“I expect that the case will be appealed first to the Court of Appeals, Division 3 in Spokane,” he said in an email to The Center Square. “But the AG can ask for a direct appeal to the State Supreme Court. The Supreme Court Commissioner, or a panel of five justices, will decide whether or not to take the direct appeal.”
The commissioner and other attorneys on the state Supreme Court’s central staff assist the court in screening cases to determine which ones should be accepted for a full hearing. At least five of the nine justices have to agree to decide a case.
Spitzer suspects the state Supreme Court will move quickly to hear the capital gains income tax case.
“It probably makes sense for the Supreme Court to take the case immediately, because that saves everyone time and expense,” he explained. “If it goes to the Court of Appeals, after that court’s decision, the losing side would appeal and the Supreme Court probably would accept the appeal. So the justices might decide to just take it right away.”
This article was originally posted on Washington Supreme Court could not directly rule on capital gains income tax
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