We have previously reported on the initial victory in our challenge to Washington's capital gains tax. As we explained, we won the battle, but the war is not yet over. The state has appealed the Superior Court's ruling that the tax is unconstitutional, and has even taken the extraordinary step of asking the Washington Supreme Court to remove the case from the jurisdiction of the Court of Appeals and hear the state's appeal directly.
We received a number of questions from our supporters in this effort and decided to share our thinking for the benefit of all Washingtonians — in part to ensure that nobody is moving out of Washington to escape the tax without the benefit of our assessment. The most common questions, and our answers, follow.
What is the likelihood that this case will go through the Court of Appeals vs. jump to the Supreme Court?
We firmly believe that this case should be heard by Division 1 of the Court of Appeals. It would be an extraordinary result for the Supreme Court to claim jurisdiction before having the benefit of the Court of Appeals' decision. That is the path the Supreme Court took two years ago when they refused to claim jurisdiction from the lower appellate court in our suit against the Seattle Income Tax. That said, the Supreme Court is the Supreme Court, and they have the right to remove the Court of Appeals from the judicial process. We will be filing our answer to whether the Supreme Court should take review by May 10.
What is the likelihood that the issue will be on the ballot this fall?
Reasonable chance — it appears that the proponents may be able to obtain both the money and sufficient signatures to put the issue on the ballot. The ballot title was recently approved. Last November, in the advisory ballot that goes to all voters whenever there is a tax increase, the people of Washington overwhelmingly rejected the capital gains tax. So we are hopeful that the same voter sentiment will repeal the unconstitutional capital gain tax, and this time it will be more than just an “advisory” ballot measure.
Should I move to Florida or Texas or somewhere that will not try to tax my gains?
Obviously, abandoning Washington state to avoid this tax is a deeply personal decision. Several of our clients have already decided that remaining in Washington is not worth the tax risk, especially if they moved here precisely because of the pro-investor attitude of prior years. Other clients are adopting a “wait and see what happens” approach. Although we stand ready to advise clients on the steps necessary to abandon their Washington state residency and domicile, we remain optimistic that such moves will not be necessary because we believe this tax is clearly unconstitutional based on current law.
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