Commentary: An income tax in Washington is simply unconstitutional

I’ve said it before, and I’ll say it again: An income tax in Washington state is unconstitutional.

Democrats in our state legislature recently passed Engrossed Senate Substitute Bill (ESSB) 5096, a bill that would impose a new 7% tax on capital gains in Washington state.

However, according to the Washington State Constitution, property cannot be taxed at a rate greater than 1%, and taxes must be uniformly applied to all residents. The Washington State Supreme Court has repeatedly ruled that a person’s “income” is considered property, and any taxes on income must conform to the uniform 1% limit.

In fact, in 2018, I sent a letter to the Internal Revenue Service (IRS) asking whether capital gains were considered an excise tax – as Governor Inslee and other Democrats in Olympia have dubiously claimed – or an income tax – as every other federal, state, and local jurisdiction in the country has rationally recognized. Their answer was clear and concise: “It is an income tax. More specifically, capital gains are treated as income under the tax code and taxed as such.”

Put simply, a capital gains tax is an income tax, and it is unconstitutional in Washington state.

As a representative of our great state in Congress, I know that Washington offers businesses – both large and small – several competitive advantages, including our lack of an income tax. This attracts entrepreneurs and small business owners from across the country and has enabled Washington to become a hotbed for innovation, empowering our citizens to make significant advancements in industries from health care and technology to energy and agriculture.

I testified before the Washington State House Finance Committee in opposition to ESSB 5096, and it is baffling to me that these legislators would take this action to stifle our state’s economic growth.

To make matters worse, this is clearly a ploy intended to cut voters out of the decision-making process. The state has attempted to pass an income tax 10 times and has failed at the ballot box and with the courts every single time. So now, Democratic lawmakers in our state legislature are attempting to circumnavigate the voters by claiming that this is an “emergency tax” – in a year when the state budget is expected to have a net surplus of $3 billion.

Just last week, the Consumer Price Index showed inflation increased by 5% in May 2021 – the fastest pace in 13 years. Our residents are already facing rising inflation. Now, they have to worry about their taxes going up, too. It’s unconscionable that just when we’re finally beginning to recover from the devastating economic impacts of the pandemic, these lawmakers have decided to raise taxes on Washingtonians.

Multiple groups have come forward to sue the state over this unconstitutional, fiscally irresponsible and economically illiterate tax. They shouldn’t have to.

This shouldn’t have to be litigated at all. The Washington State Constitution, our state’s Supreme Court precedent, and the federal tax code remain clear: This tax is unconstitutional. The sooner our lawmakers understand that, the better.

Rep. Dan Newhouse represents the 4th District in the U.S. House.