The notification regarding the corporate income tax case has now been completed. All we can do is wait for the nine Supreme Court decisions. Will Washington accept what every other state, the IRS, and the rest of the world know to be true (a corporate tax is an income tax), or will the legislature agree? our judge that Washington has found a new way to tax capital gains tax ? While we await the results, here is a summary of the amicus briefs filed earlier this week.
Briefs state that the capital tax is an excise tax:
- Law professor – “U.S. Supreme Court and Supreme Court decisions have allowed dissenters to characterize almost any tax on the use or transfer of property as an onerous tax on that property, as done by the respondents here. But only occasionally and at other times did these ideas succeed, as in Culliton and Pollock. Culliton and Pollock’s argument—that a broad income tax is a property tax, so all income taxes are property taxes—is not compelling. the current economic situation. And this Court has refused to blindly follow this syllogism in the tax law. We should refuse to do so here. At the very least, this Court should ensure that Culliton’s scope is limited and not extend the dubious logic of Culliton to eliminate a tax that operates only on the transfer of capital assets. Rather than stretch case law that has never been applied to preclude a tax that narrowly targets economic benefits in the transfer of property, this Court should rely on its tax precedents. on taxes to support the resolution of the National Assembly on the tax on the income received from the transfer. in the capital assets of ESSB 5096.”
- Unions and activists – “By passing the capital gains tax, Washington joins the majority of states that benefit from the tax. It’s a small but important step. It is in the direction of improving Washington’s regressive tax system, so that all Washingtonians pay no more and no less than a reasonable debt for the State’s provision of basic services that benefit all Washingtonians. The tax will be used to improve public education, and increase access to and access to early childhood care and education, lifelong learning programs for children and parents and an extraordinary return on investment for the State and all its citizens. Taxes place a small burden on the taxpayers who can afford them the most, and ts y makes perfect sense that it would cause Washington’s wealthiest residents to flee to other states with no income or capital gains tax. In short, it’s a common measure that benefits all Washingtonians without harming anyone, and the Court should uphold it as a legitimate tax under Washington law. “
Note – Only states with tax credits receive income. No state has a separate capital gains tax. Washington was the first to confirm it.
- Educator – “At most, the plaintiffs’ efforts to distinguish the corporate income tax from other taxes are inconsequential. The Court should follow its precedent in this case and hold that the capital gains tax, which arises from the sale of capital, is a tax…Contrary to the main law that classifies the tax on the transfer of property as tax on taxes and undermines the very purpose of stare decisis, which is consistency. “
Note – The Supreme Court in 1960 held that its previous judgment was correct and that a constitutional amendment was necessary to impose an income tax.
- Racial Groups – “For this democratic and self-governing way, the legislature enacted the capital tax to fund the state’s primary duty of educating all resident children regardless of gender. race or domestic wealth. This Court should respect and maintain this democratic authority by upholding the constitutionality of the capital gains tax. Centuries of institutional and economic racism have created racial wealth disparities for BIPOC. A regressive tax code perpetuates these inequalities by requiring those least able to pay (disproportionately BIPOC) to bear the burden of the tax. In 2021, in response to lobbying from a broad coalition of community organizations, lawmakers enacted a capital gains tax as a step toward reforming the law on unfair taxes in Washington and will improve the impact of racism.
Note – Washington voters rejected 10 direct ballot measures, including six constitutional amendments.
Briefs argue that capital gains tax is an unconstitutional tax:
- BIAW and the Washington Retail Association – “The law, by its own admission, is a tax on the receipt of individual profits, not a tax on the transfer of capital, as the State maintains. The State’s effort to treat the law as a tax represents a complete departure from the way all other jurisdictions in our country handle revenue. Starting with the federal government and the Internal Revenue Code, under which Washington’s tax system is fully modeled and based, gains from the sale of capital are treated as personal income. permanent. Forty-one states that the payment of capital gains tax is also treated as income. The only states that do not tax income as income are those that do not tax income at all – Alaska, Florida, Nevada, South Dakota, Texas, and Wyoming – and the two states, New Hampshire and Tennessee, which tax only dividends and income earned by individual taxpayers. Therefore, all jurisdictions in our country that pay taxes on profits receive them as income, and legally accept them as income tax. The sole exception is Washington, by virtue of ESSB 5096. With a vote of forty-nine to one, the weight of unanimous authority compels the conclusion that the corporate income tax business imposed by ESSB 5096 is an income tax, not a tax.
- Association of Washington Business, Technology Network, Citizen Action Defense Fund, and Ethnic Chamber of Commerce Coalition – “Stakeholders are concerned about the impact of this tax on Washington businesses and business owners if taxes are respected. Amici members should not be subject to significant disruption to the state’s tax system because the legislature decided to ignore the meaning of the Washington Constitution and almost hundred years of Washington income tax litigation…Amici agree with the high court that the capital. The corporate income tax imposed by ESSB 5096 is classified as an income tax in all other respects. However, if it is treated as a taxable income, it creates a double taxation risk. This Court should not recognize double taxation as a matter of law or policy.
- National Tax Economists and Policy Analysts (Joined by WPC) – “For nearly 100 years, Washington state’s income tax has been unconstitutional. Voters in 1934, 1936, 1938, 1942, 1944, 1970, 1973, 1975, 1982, and 2010 rejected ballot measures to pass the tax. capital gains tax. The respondents confirmed this as payment of income tax. The Court of Appeals below ruled that this tax was an income tax and therefore unconstitutional…An income tax is a tax on income. The income tax does not have a level of redemption, and it is not set in the total of each year, and it does not control the period of setting and the requirements of the federal tax. Income tax does it all. Washington taxpayers will file a federal income tax return on the same day, and the tax base is derived from the federal income tax return and the state tax. The IRS joins every state and every tax expert in recognizing that business profits are income…Washington’s capital gains tax is not a per capita consumption tax. but on total income, measured as a percentage of income and applied as a whole. all economic benefits. The tax includes exemptions and deductions to limit the tax area for some people, but not to be applied to an activity. The tax is not based on transactions, but on the sum of capital received by a person in a year. All these are the characteristics of income tax and not income tax”.
The Supreme Court will hear oral arguments on the capital gains tax on January 26, 2023.
Washington Policy Center joins the income tax in an amicus brief
Former IRS attorney “struck” by argument of Washington capital gains tax
UW tax law professor on new income tax: “Will be found unconstitutional”
Capital Gains Tax Discussion with Washington University Tax Expert Professor Schumacher
Income tax introduction – who said that?