U.S. Supreme Court will not rule on Washington state’s capital gains tax

U.S. Supreme Court has decided not to review Washington state’s capital gains tax, allowing the state to continue to collect the tax, according to documents released Tuesday.

In March, the Washington state Supreme Court upheld the capital gains tax in Quinn v. Washington after overturning a lower court’s ruling and after a lengthy legal battle.

The law imposes a 7% tax on profits over $250,000 from the sale of assets including stocks, bonds, and mutual funds. This means that if someone made profits of $300,000 from selling stocks, they would pay 7% in taxes on $50,000 of those profits.

In a news conference with Republican lawmakers Tuesday, House Minority Leader Drew Stokesbary said Republicans are disappointed but not surprised by the Supreme Court’s refusal to hear the case.

Stokesbary said those arguing for the capital gains tax used a dormant commerce clause, a concept that conservative justices appointed by Republicans have expressed skepticism toward, he said.

He also said it is “disappointing that legislative Democrats essentially got away with the word games they played,” as the Internal Revenue Service and other states recognize that “a tax on capital gains income is a tax on income.”

Others were satisfied with the U.S. Supreme Court’s decision.

“The U.S. Supreme Court’s decision today was a huge victory for Washington kids and families. It preserved $900 million a year to support Washington’s child care and education programs, far more than was initially projected to be collected from this tax,” said Treasure Mackley, executive director for Invest in Washington Now. “This decision could not have come at a more critical time as school districts across the state are facing funding shortfalls.”

Mackley noted in a news release that opponents have repeatedly lost the argument that the capital gains tax is an income tax.

Revenue from the capital gains tax goes to the Education Legacy Trust Account.

Farms, real estate, retirement, and many other accounts are exempt from the capital gains tax. Additionally, less than 8,200 people in Washington state pay the capital gains tax, according to the Washington State Budget and Policy Center.

Although the U.S. Supreme Court declined to address the case, the capital gains tax could still face some challenges this year. A ballot initiative on the tax sponsored by Let’s Go Washington, which garnered enough signatures before the December deadline, is waiting to be certified with the Secretary of State.