(The Center Square) – Washington Attorney General Bob Ferguson has stopped insisting on using the words “excise tax” in the ballot title for Initiative 1929, which would repeal the state’s nascent capital gains tax.
The attorney general’s proposed language used the term “excise tax” in its ballot title 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,” alleged the complaint, which was filed April 11 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.”
At the time, the Washington Attorney General’s Office (AGO) defended the title.
“The Legislature described the capital gains tax as an excise tax in statute, and our ballot title tracks their characterization,” AGO communications director Brionna Aho told The Center Square in an email. “The ruling of the Douglas County Superior Court is not final (given that it is on appeal), and is not binding on the Thurston County Superior Court in any event. All the parties recognize this case will ultimately be decided by the State Supreme Court. There is nothing disingenuous about using the Legislature’s accurate characterization of a statute to describe the statute.”
However, based on the briefs filed in the case in Thurston County Superior Court, it appears as if Ferguson has changed his mind about the advisability of pushing the issue in this venue.
The AGO has offered an “alternative ballot title” that, according to its brief, “would also address the Sponsors’ objection to ‘excise,’ which in any event reasonably matches the Legislature’s own description of the tax that the measure would repeal.”
According to Jason Mercier, a director for the free market think tank Washington Policy Center whose research was cited as crucial in Judge Huber’s ruling, this may not settle the whole issue.
Yet, it resolves some of the disagreements between Ferguson and those campaigning to repeal the tax.
“Although removing ‘excise tax’ addresses a major red flag there are still disagreements with the summary, the I-1929 campaign wants ‘income’ added, and there is the countersuit by the capital gains income tax proponents,” he told The Center Square in an email.
He added, “The AG continues to object to adding ‘income’ to I-1929 ballot title. Here is the actual definition from (Senate Bill) 5096: ‘Federal net long-term capital gain’ means the net long-term capital gain reportable for federal income tax purposes.”
A statewide capital gains 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, 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.