E-News: Court issues surprise ruling on state income tax

March 25, 2023

Hello Friends and Neighbors,

The Senate Ways and Means Committee held a public hearing on the proposed Senate operating budget yesterday, and it lasted a whopping eight hours, until 10 p.m. That had me waiting until today to get this report together for you. Keep reading for more about the budget proposal.

On Monday morning I would have told you this week would be all about budgets – but there was even more to the week than I could have expected, and not in a good way, unfortunately.

We need to start with something that happened in Clark County, not Olympia. On Wednesday morning calls came in from Portland television stations about what was then the disappearance of Meshay Melendez and her 7-year-old daughter, Layla Stewart. The circumstances of the case, which involved domestic violence, were reminding the news media of the 2019 murder of Vancouver mom Tiffany Hill.

I told the media that as the prime sponsor of the legislation that eventually became the Tiffany Hill Act, I had questions about the Melendez case. But I also noted Clark County has done an exemplary job of putting the Tiffany Hill law into action on behalf of domestic-violence victims, and I was not going to rush to judgment about what prosecutors did or did not do.

That evening I was in a Law and Justice committee meeting, and we were having a public hearing on a bill related to domestic-violence victims – of all things – when I received the terribly sad news that the bodies of the mother and daughter had been found.

It is so heartbreaking that not only another young mother but also an innocent child had their lives ended so senselessly. But for me it goes beyond that. This year, based on another factor that had contributed to Tiffany Hill’s murder, I filed a bill (SB 5076) that would allow domestic-violence suspects to be held without bail in certain circumstances. So far the chair of the Senate Law and Justice Committee has refused to act on my proposal whatsoever. I don’t know if a bail situation was a factor in the murder of Meshay Melendez and her daughter. Either way, this is incredibly frustrating.

Four years of work was needed to win support at the Capitol for the law that bears Tiffany Hill’s name. To be candid, I doubt the bill would have gotten through – in that fourth year, 2020 – had it not been for the story of her life and her death and the steadfast community around her. Protecting DV victims should not be a partisan issue – we should be able to do more without another four years of work, or having to name bills after murdered young mothers.

town hall pair
A big ‘thank you’ to everyone who came to the Port of Camas-Washougal (left, where it was standing room only) and the Exhibit Hall at the Skamania County Fairgrounds in Stevenson (another solid turnout) for our town hall meetings this past weekend.

In surprising decision, Supreme Court upholds Democrats’ tax on capital-gains income
The state Supreme Court held a hearing in late January on what I and many others have viewed as a state income tax, adopted in 2021 by the Democratic majority – which declared the tax to be an excise tax instead. The case of Quinn v. State had been appealed to the high court after a lower court declared the tax unconstitutional in March 2022.

Yesterday the court issued its ruling. The timing put it right in between Thursday’s introduction of the Senate Democrats’ operating-budget proposal, which “books” revenue from the tax, and the expected introduction Monday of the House Democrats’ corresponding plan.

I hoped the fact that only two months had elapsed between hearing and ruling meant the court had reached the only conclusion available (in my opinion), and would side with the lower court. Instead, to the disbelief of many of us, the court upheld the constitutionality of Washington’s capital-gains tax with a 7-2 vote.

Here’s the public statement I made in reaction to the ruling:

“It’s disappointing that a majority of the justices went along with the Democrats’ creative argument that this is something other than an income tax. I thought the Douglas County judge got it exactly right last year in ruling this tax unconstitutional. No one else, including the Internal Revenue Service, sees the capital gains from the sale of certain assets as anything but income. Washington is a special place, but this isn’t the kind of outlier we ought to be.

“We know Democrats were hoping the court would rule in a way that would enable them to try for a full-blown income tax in our state. I don’t see how this decision gets them there, and that is a relief. But taxpayers clearly need to be on their guard – we should expect the Democrats to start adjusting the parameters of this tax so it applies to more and more people over time, which means more and more money going to government. That is not what our state needs, especially with an economic downturn on the horizon. There’s too much government greed already.”

I’ve had time since to look at specific language in the ruling, and frankly, some of it seems to go places that have nothing to do with whether the tax is constitutional. Here are just a few examples.

  • “Washington’s tax system has earned the regrettable title of most regressive in the nation.” (cites a study by the liberal Institute on Taxation and Economic Policy, which… by the way, also characterizes a capital gains tax as an income tax, not an excise tax)
  • “The poorest individuals bear the greatest tax burden . . . This burden falls disproportionately on Black, Indigenous, and People of Color (BIPOC), who are overrepresented in low income brackets.” (cites a 2022 report to the Legislature related to the so-called “baby bonds” proposal)
  • “As a result, Washington’s upside-down tax system perpetuates systemic racism by placing a disproportionate tax burden on BIPOC residents” (no citation, pure unsubstantiated opinion… from our state’s highest-ranking jurists)

We have to remember five of the nine Supreme Court justices were placed on the court, initially, through appointments by Democratic governors. Gov. Jay Inslee, who has repeatedly called for an income tax in his 10 years as governor, is responsible for three appointments. The most recent was in 2020. Democrats passed the capital-gains tax the very next year, intending for it to reach the Supreme Court on appeal. I don’t think that’s a coincidence.

The statehouse reporter for Seattle’s KING-TV stopped by my Senate office yesterday for an interview about the Supreme Court’s decision upholding the state capital-gains income tax. Click here for the interview.

Senate puts operating-budget proposal on table, passes capital budget
It’s too soon to go into detail about the 2023-25 operating-budget proposal put forth by the Senate majority on Thursday, as it is still evolving. For now I’ll call out three things about this $69.2 billion plan: it balances with no new taxes, the increase in spending is much smaller than we’ve seen in recent budget cycles, and it reflects a great deal of Republican input. I don’t think there’s any question that our involvement helped control the spending and keep new taxes out.

I encourage you to click here for my statement about the budget, which explains how it was put together in a very inclusive way, and here for the statement I issued Monday after we received the first of the state’s quarterly revenue forecasts for 2023. Considering the forecast indicates an economic slowdown in our state, I’m glad the Senate operating-budget proposal takes a more cautious approach than we’ve seen lately.

And I have to mention: it also would support the creation of a work group to study the emergency-powers issue. Republicans have tried for years now to have a serious discussion about giving the legislative branch the authority to serve as a check on all, not just some, of the executive branch’s powers during a state of emergency. Legislative work groups typically include members of both parties from both chambers, and since none of my emergency-powers bills received public hearings, this would be a different way to at least make that discussion happen.

The capital budget that was unveiled Monday and passed unanimously by the Senate yesterday would do some very good things, broadly, for the effort to create more affordable housing and increase our state’s capacity to provide behavioral-health services.

Locally, the capital budget would include investments of $4 million for infrastructure projects in Washougal, $750,000 for a new roof for the high school in Stevenson, close to $5 million for recreation and conservation work across the 17th District, and $4.5 million in funding to support essential community services in Skamania County that can no longer be supported by timber revenue due to Endangered Species Act restrictions. There’s also money to go toward a new regional training center for law enforcement officers, to help get new hires onto our streets and roads sooner.

House committee chair is saying ‘no’ to my anti-fentanyl bill
Unbelievably, it seems my bill to expand the crime of “endangerment with a controlled substance” to include fentanyl and other synthetic opioids has stalled in the House Community Safety, Justice, and Reentry Committee.

Senate Bill 5010 received a public hearing March 14, but the committee chair has since advised me that he isn’t planning to bring it to a vote… apparently because of concerns that parents could be charged. His caucus wouldn’t support it, he told me. My question is, what about the defenseless people who could be victims?

Considering the bill came out of the Senate unanimously, I would hope there are at least 10 Democrats in the House who would vote yes, if Democratic leadership allowed SB 5010 to reach the floor of the House. Along with the 40 Republican members, that’s a majority in the 98-member House. I haven’t given up on getting a committee vote for this bill, even though Wednesday is the deadline.

Two of my bills received attention in the House this week (a total of eight are still “alive”):

  • Medicaid accountability (SB 5497) – I introduced this bill because I believe we should be looking for every opportunity to stretch Medicaid dollars by eliminating waste and fraud. It stems from a state performance audit that made several recommendations to the state Health Care Authority for improving the integrity of its Medicaid program. The bill was voted out unanimously yesterday by the House Health Care Committee.
  • Homecare aide certification (SB 5278): This is my bill to prepare our state for the coming “silver tsunami” of people needing long-term care. It would identify and overcome the barriers to getting home-care aides trained and certified. On Tuesday the bill was voted out of the House Committee on Postsecondary Education and Workforce.


I hope you will reach out whenever you have a comment or question about your state government.

Yours in service,

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