Group asks U.S. Supreme Court to strike down WA capital gains tax

A conservative advocacy group has filed an appeal with the U.S. Supreme Court to challenge Washington’s capital gains tax.

Passed by the Legislature in 2021 and signed into law by Gov. Jay Inslee, the tax on some capital gains was upheld this spring by the state Supreme Court in a case known as Chris Quinn v. State of Washington.

In a 7-2 decision, the court upheld the 7% tax on profits from the sale of stocks and bonds over $250,000, ruling that it is not a tax on income, which could have led to it being struck down. The court instead ruled that it is an excise tax.

Now the Freedom Foundation is appealing to the U.S. Supreme Court, according to a statement by the advocacy group. The appeal contends the tax “violates the Commerce Clause of the U.S. Constitution, which reserves to Congress the right to regulate interstate commerce, thus depriving states of the ability to do so.”

“If the Supreme Court decides to accept the case and concludes that the tax violates the Commerce Clause, it could strike down the entirety of the tax and potentially open the door for the refund of taxes previously paid,” according to the statement.

In response, the executive director for Invest in WA Now claimed that those challenging the tax “are desperately trying to grab $800 million a year from Washington’s child care and education to give it to ultra-millionaires and billionaires.”

“Polls show Washingtonians strongly support making the wealthiest pay what they truly owe in taxes for services all of us depend on,” Treasure Mackley, whose advocacy organization has supported the capital gains tax, said in a statement. “Only when we have a fair tax code can we undo decades of racism and disinvestment that hurts families, communities, and small businesses.”