Group Appeals WA Capital Gains Tax To The US Supreme Court

The conservative Freedom Foundation is appealing the Washington Supreme Court's decision upholding the state's Capital Gains Tax to the U.S. Supreme Court.

The appeal filed Monday says the tax violates the U.S. Commerce Clause which only grants Congress the right to regulate interstate commerce.

The filing claims the tax violates the clause by taxing out of state transactions by Washington residents.

The Freedom Foundation says that in avoiding the limits of state law, the Washington Supreme Court may have solved a state-law problem but created a federal-law problem.

“Had this case been heard by a federal court instead of state court, it would already have been thrown out,” said Eric Stahlfeld, Freedom Foundation chief litigation counsel. “It violates the ‘dormant’ Commerce Clause. States simply have no power to interfere with another state’s power over activities within that sovereign state.”

The appeal abandons the lawsuit's original claim that the capital gains tax is an illegal income tax, as Washington has no income tax.

The lawsuit was originally heard in Douglas County, where Superior Court Judge Brian Huber sided with the plaintiffs, including lead plaintiff Chris Quinn (Quinn v. Washington) of East Wenatchee.

The Capital gains tax imposes a 7 percent assessment on capital gains above $250,000.

The Freedom Foundation contends that if Supreme Court accepts the case and concludes that the tax violates the Commerce Clause, it could strike down the tax in its entirety and open the door for the refund of taxes previously paid.

The Foundation has vowed since first filing the lawsuit to carry its fight all the way to the U.S. Supreme Court if necessary

The high court has not said whether it will hear the appeal.