(The Center Square) – Initiative 1929, which would repeal Washington state’s nascent capital gains tax, won’t be on the ballot this year.
That’s because initiative supporters have dropped plans to proceed with the campaign, opting instead to see how things play out regarding a lawsuit challenging the tax’s constitutionality, which hinges on whether it’s characterized as an income tax or an excise tax.
“While our polling shows that voters overwhelmingly support repealing the capital gains income tax, our coalition has confidence in the strength of the court case, and we believe that the lower court decision will be upheld on appeal,” initiative spokesman Mark Funk told the (Everett) Daily Herald on Friday. “Therefore, we believe the best coalition strategy in 2022 is to place our confidence in the courts to overturn this illegal tax.”
On March 1, Douglas County Superior Court Judge Brian Huber ruled the capital gains tax was unconstitutional because it’s a progressive income tax. The Washington State Constitution’s uniformity clause does not allow income to be taxed at different rates.
Last year, a statewide capital gains tax – Senate Bill 5096 – was approved by the Legislature and signed into law by Gov. Jay Inslee. The legislation placed a 7% tax on the sale of stocks, bonds, and other assets above $250,000. Exceptions include the sale of real estate, livestock, and small family-owned businesses.
Following Huber’s ruling, Attorney General Bob Ferguson asked the state Supreme Court to accept the case on direct appeal.
The I-1929 campaign’s decision not to continue is but the latest twist for a now-defunct measure that has been at the center of a pair of controversies.
The campaign sued the Office of the Attorney General for what it called its “misleading” ballot title and summary on the grounds the proposed language used the term “excise tax” despite Huber’s ruling. Thurston County Superior Court Judge Indu Thomas ruled neither “excise tax” nor “income tax” would appear on the ballot title and summary for I-1929.
Meanwhile, supporters of the capital gains tax had set up a hotline for people to track those gathering signatures for I-1929.
While the I-1929 campaign characterized its decision to forgo an attempt to get on the ballot as a vote of confidence that the court system would uphold Huber’s ruling, Northwest Progressive Institute founder and Executive Director Andrew Villeneuve cast a more skeptical view of the demise of the initiative, which he said never really got off the ground.
“The only thing that the I-1929 effort will go into the history books as having accomplished is serving up a metaphorical feast for right wing political consultants,” Villeneuve said in a Friday blog. “A total of $702,750 was raised and $545,000 was pledged before the plug was pulled, and not a single signature was gathered.”
Initiative sponsors faced a July 8 deadline to collect and turn in approximately 325,000 signatures to qualify it for the ballot.
Jason Mercier, director of the Center for Government Reform at the pro-free market Washington Policy Center, noted in a Sunday blog that with “the I-1929 campaign suspending its activities, the only vote to date by the public on the new capital gains income tax was the non-binding advisory vote in 2021. At the time, 61% of voters recommended the capital gains income tax be repealed.”
He went on to note, “With the 1929 campaign suspending its activities, we now wait to see if the state Supreme Court decides to take direct review or allow the Appeals Court to act first on the capital gains income tax lawsuit.”
The Washington Supreme Court is expected to decide on the question of direct review this fall.