As previously reported on May 7 and June 17 of this year, Washington state lawmakers enacted a new capital gains tax, set to go into effect on January 1, 2022, but two lawsuits were initiated to declare the tax unconstitutional. To date, the court cases are continuing their way through the judicial process.
On November 2, 2021, as part of the statewide general elections process, Washington voters were not asked to vote on the new state capital gains tax; rather they were asked for their opinion on the tax.
The specific question posed, as written by the Office of the Attorney General, is as follows:
State Measures – Advisory Vote No. 37
The legislature imposed, without a vote of the people, a 7% tax on capital gains in excess of $250,000, with exceptions, costing $5,736,000,000 in its first ten years, for government spending.
This tax increase should be:
The voters have been heard. The Washington state elections office is reporting that the voters overwhelmingly want the new tax repealed. 652,065 or 62.99% of those that answered the question want the tax repealed. 383,136 or 37.01% of those that answered the question want the tax maintained.
Will Washington lawmakers listen to their constituents and move to repeal the new law before its effective date? Will the courts rule on the constitutionality of the new law? Will voters get the opportunity to do more than just give an opinion on the matter (i.e., vote on its repeal or maintenance)?
It is an interesting time in the state of Washington relative to local taxation. I will continue to report on the future of the Washington capital gains tax. So far, its life has been shaky.
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University Advanced Conference on Subchapter SNew York, NY, 7.21.22-7.22.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationNew York, NY, 10.23.22-10.28.22
- "The Intersection of Code Section 1031 and Opportunity Zones," 2022 OSCPA Northwest Federal Tax Conference10.24.22
- "Entity Classification – The Check-The-Box Regulations Revisited," New York University 81st Institute on Federal TaxationSan Diego, CA, 11.13.22-11.18.22