(The Center Square) — Initiative 1929, which would repeal Washington state’s nascent capital gains tax, will not be on the ballot this year.
Indeed, supporters of the initiative have abandoned plans to continue the campaign, opting instead to see how things unfold regarding a lawsuit challenging the constitutionality of the tax, which hinges on whether it qualifies as an income tax or excise tax.
“While our poll shows voters overwhelmingly support the repeal of the capital gains tax, our coalition is confident in the strength of the court case and we believe the lower court’s decision will be upheld on appeal.” said initiative spokesperson Mark Funk. (Everett) Daily Herald Friday. “Therefore, we believe the best coalition strategy in 2022 is to trust 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 is a progressive income tax. The Uniformity Clause of the Washington State Constitution does not allow income to be taxed at different rates.
Last year, a statewide capital gains tax – Senate Bill 5096 – was approved by the Legislative Assembly and signed into law by Governor Jay Inslee. The legislation imposed a 7% tax on the sale of stocks, bonds and other assets over $250,000. Exceptions include the sale of real estate, livestock and small family businesses.
Following Huber’s ruling, Attorney General Bob Ferguson asked the state Supreme Court to allow the case on a direct appeal.
The I-1929 campaign’s decision not to proceed is just the latest twist in a now-defunct measure that has been at the center of two controversies.
Countryside for follow-up the Attorney General’s Office for what it called its “misleading” title and ballot summary on the grounds that the proposed wording used the term “excise tax” despite Huber’s decision. Thurston County Superior Court Judge Indu Thomas ruled neither “excise tax” nor “income tax” would appear on the title and summary of the ballot for I-1929.
Meanwhile, supporters of the capital gains tax had implemented a direct line for people to follow those collecting signatures for I-1929.
While the I-1929 campaign characterized his decision to drop a ballot attempt as a vote of confidence that the court system would uphold Huber’s decision, Northwest Progressive Institute founder and executive director Andrew Villeneuve said expressed a more skeptical view of the demise of the initiative, which he said never really took off.
“The only thing the I-1929 effort will go down in the history books as having accomplished is serve a metaphorical feast to right-wing political consultants,” Villeneuve said in a Friday. Blog. “A total of $702,750 was collected and $545,000 was pledged before the plug was pulled, and not a single signature was collected.”
The initiative’s sponsors faced a July 8 deadline to collect and deliver around 325,000 signatures to qualify it for the ballot.
Jason Mercier, director of the pro-free market Washington Policy Center’s Center for Government Reform, noted on Sunday Blog that with “the I-1929 campaign suspended, the only public vote to date 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 operations, we now wait to see whether the State Supreme Court decides whether to conduct a direct review or allow the Court of Appeals to act first on the capital gains tax lawsuit.”
The Washington Supreme Court is expected to rule on the direct review issue this fall.