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Legal Challenges Start To Washington's New Capital Gains Tax

Screenshot from TVW

The legal battle over Washington’s new capital gains tax went to a virtual court hearing Wednesday. A judge in Waterville heard a request by the state attorney general’s office to dismiss two challenges to the new law.

Washington’s new capital gains tax applies to people who make more than a quarter-of-a-million dollars on the sale of certain assets. It’s scheduled to go into effect the first of next year. The tax doesn’t apply to real estate sales, timber or a variety of other transactions.

The legislative sponsors call it an excise tax that will apply only to the richest one-tenth-of-one-percent of residents. Opponents, represented by former state Attorney General Rob McKenna, call it an income tax, which is illegal under the state constitution.

“This tax is going to be collected. It is a dead cinch certainty to be collected from many thousands of people per year," said McKenna at a Wednesday hearing presided over by Douglas County Superior Court Judge Brian Huber.

The state attorney general’s office asked Huber to dismiss the challenges brought by farmers and small business owners. Noah Purcell, who is the state’s top appeals attorney, argued the plaintiffs don’t yet have standing to file a challenge. He says they haven’t been harmed by the tax because it hasn’t yet taken effect.

"What’s not sufficient is just to say that we own capital assets that would be subject to the tax if we sold them and if we incurred gains beyond $250,000," Purcell said.

Judge Huber took under advisement the state’s request that those challenges be dismissed, as well as another request that the cases be moved from Douglas County to Olympia.