The Opportunity for All Coalition (OFAC) is a non-profit 501c4 organization whose mission is to win a legal challenge to strike down Washington state’s illegal capital gains income tax.
Capital gains are considered income in Washington state and everywhere else in America. To evade the state constitution, and in defiance of the voters’ will, Washington legislators resorted to an old trick that our courts have rejected in the past: they labeled this tax an “excise.” Taking the law at face value, this excise tax on income from capital gains is also illegal.
Relabeling a tax does not change its substance, and our courts have struck down at least three prior attempts to enact income taxes by calling them excise taxes.
Whether the courts agree that this is an excise tax or that it is an illegal income tax, we believe the new state tax on income from capital gains will be blocked by the courts.
Here are 6 things you should know about the illegal tax we are fighting for all Washington taxpayers:
- A graduated income tax is unconstitutional in the state of Washington. While Washington’s Constitution states that the maximum income tax on income property is 1%, the state legislature passed Senate Bill 5096, which will impose a flat rate tax of 7% to Washington residents’ net federal long-term capital gain, making the tax illegal.
- This tax has been characterized as an “excise tax” when it is actually an income tax. Meanwhile, every other state in the country, including the IRS, agrees that capital gains are income. Washington voters are being tricked.
- Legislators intentionally included language to prevent a vote of the people against the measure. All prior attempts by the state to introduce a bill that would increase income tax have been rejected by Washington voters. In fact, it has been rejected 10 times.
- This is a precursor to a broader statewide income tax. State legislators have been explicit that this capital gains tax is the first step toward passing a broader state income tax on all income.
- The income tax is unnecessary. State tax revenues increased 85.7% over the past decade while population increased 13.5%.
- For Washington state, having no income tax is a major source of competitive advantage. Washington’s existing tax structure attracts employers to Washington, increases capital investment and hiring, and is currently generating more than enough state tax revenue.