Anti-capital gains tax campaign sues Washington AG for ‘misleading’ ballot title
(The Center Square) – The Initiative 1929 campaign to repeal Washington state’s nascent capital gains tax is legally challenging what it calls the Office of the Attorney General’s “misleading” ballot title and summary for the proposed ballot measure.
The attorney general’s proposed language uses the term “excise tax” despite the March 1 ruling by Douglas County Superior Court Judge Brian Huber that found the capital gains tax unconstitutional because it’s a progressive income tax.
“The Attorney General’s proposed ‘Ballot Title’ and ‘Ballot Measure Summary’ are misleading, imprecise, and will likely cause confusion and improper bias in opposition to the initiative,” alleges the complaint, which was filed Monday in Thurston County Superior Court. “The proposed concise description also exceeds the statutorily mandated 30-word limit. The Court can resolve these problems by revising the ballot title and summary of the measure.”
The Center Square emailed the Attorney General’s Office asking for comment on its decision to use the term “excise tax” in the ballot title and summary in light of Huber’s ruling, but received no response.
The current ballot title and summary are meant to distract voters, according to the petition.
“Voters will readily understand that capital gains are reported to the IRS as income,” the complaint reads. “Voters will almost certainly never have encountered an excise tax on capital gains. After all, the federal government and every other state in the union classify a tax on capital gains as a tax on income. The incorrect excise tax label on the ballot title will cause confusion.”
The complaint backs up its case by referring to Huber’s ruling.
“Labeling RCW 82.87 as an excise tax is especially concerning given the definition is at issue in ongoing litigation,” the complaint notes. “The Douglas County Superior Court has already ruled that RCW 82.87 is an income tax, not an excise tax. That ruling stands as of the time of this filing, making the proposed ballot title erroneous. If the Douglas County Superior Court ruling is still in place by the time this initiative is voted upon, then the ballot title will incorrectly set forth the law at the time of the vote.”
Even before Monday’s legal action, Jason Mercier, whose research factored into Huber’s ruling, expressed disappointment with the situation during an appearance last week on KVI’s “Commute With Carlson” radio program.
“I was hopeful that the fact that we have an Inslee-appointed judge ruling just like everybody else this is an income tax, not an excise tax, that when the Attorney General’s Office wrote the ballot title and summary for this new initiative, it would reflect that,” Mercier, director of the Center for Government Reform at the pro-free market Washington Policy Center, told host John Carlson on Friday. “It would honestly reflect what is being proposed, and unfortunately it still is calling it an excise tax in the ballot title and summary.”
Mercier speculated on the show that a challenge to the ballot title and summary could “set up an interesting legal situation here in the coming weeks.”
He went on to ask, “Does the Thurston County Superior Court want to pretend that the Douglas County Superior Court doesn’t exist? How do they handle the fact that the court has ruled this is an income tax?”
A statewide capital gain tax was approved by the Legislature and signed into law by Gov. Jay Inslee in 2021. The legislation placed a 7% tax on the sale of stocks, bonds, and other assets above $250,000.
Following Huber’s ruling that the capital gains tax is unconstitutional, Attorney General Bob Ferguson asked the state Supreme Court to accept the case on direct appeal.
The tax’s constitutionality hinges on whether it’s characterized as an income tax or an excise tax.
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