“This is going to be ruled unconstitutional” “Publications” Washington Policy Center
While waiting for the capital gains tax litigation to go to court, the University of Washington Law School released an interesting video: “Three Minute Legal Advice: Capital Gains Tax” . The video is a short interview with Professor Scott Schumacher, Director of the Graduate Program in Taxation. Of particular note are these comments by Professor Schumacher:
âA capital gains tax is just a tax on certain types of income. . . To the extent that this is an income tax, and I think it is, it will be ruled unconstitutional.
These comments from a tax law professor calling capital gains tax income tax come as no surprise. From the IRS, to every other state in the country, to tax professionals around the world, the analysis is the same: a capital gains tax is an income tax. A very volatile income tax at that.
The extreme volatility of capital gains taxes is so well known that Attorney General Bob Ferguson pointed to the unpredictable nature of the tax in an attempt to get the lawsuits dismissed. Extract from the brief of the Attorney General:
âPlaintiffs have no way of knowing at this time whether they will sell capital assets in a year to come and realize capital gains greater than $ 250,000. For example, even if they currently own stocks that have increased in value by more than $ 250,000, they have no way of knowing what those stocks will be worth in 2022 or beyond, when the tax comes into effect. force. Last year, the stock market fell almost 30% in less than a month; between 2007 and 2008, the stock market fell by about 50%; and from 2001 to 2002, the NASDAQ index fell more than 75 percent. As these examples show, claimants have no way of knowing the future value of their non-exempt capital assets. So, unless the plaintiffs allege foresight (which would raise their own issues), they cannot know that they will sell non-exempt capital assets at a gain greater than $ 250,000 in a future year.
If the plaintiffs are far-sighted, what does this mean for the state’s tax bill on capital gains income tax?
One of the leading lawyers in the pending litigation, former Attorney General Rob McKenna, provided an update today on the case in this Lens podcast interview.
As the litigation progresses, several cities are also working to make their citizens and businesses understand that at least at the local level, they will not impose any type of income tax.