Why is State Collecting Cap Gains Tax ‘Early?’ See Their Reasons
The Washington State Supreme Court is not going to render a decision on the controversial capital gains tax until sometime after January 26th, 2023. So why is the state going to start collecting it on January 1st?
Department offers excuses as to why they are collecting
By way of information from The Center Square, we now know concisely why the Department of Revenue 'asked' to collect, and is going to collect the tax that a Superior Court Judge already ruled was unconstitutional.
Back in March, Douglas County Superior Court Judge Brian Huber struck down the tax, which was passed by the legislature and signed by Gov. Inslee in 2021, saying it violated the state Consitution because it was classified as an income tax. He said in his ruling:
(the tax is) "unconstitutional and invalid, and therefore, is void and inoperable as a matter of law.”
However, State Attorney General Bob Ferguson asked the State Supreme Court to take up the issue, and on January 23rd, 2023, oral arguments begin. Then, the court will sometime later, render its judgment.
The State Supreme Court, however, did rule the Department of Revenue could begin collecting the tax beginning January 1st, and if it is found to violate the Constitution, the state says it would "refund" the money to the taxpayers.
Department of Revenue gives reasons why they wanted to collect the tax.
Earlier in December, an official with the DOR said this at a public hearing, explaining why they want to start collecting the tax, even before it's been determined if it's legal (via the Center Square). Michael Hwang, who is a tax specialist for the Department's interpretation and technical advice division, said this:
“The Department of Revenue is engaging in rulemaking to ensure that the state can comply with the Legislature’s directive to be ready to collect the tax in April 2023, and so that taxpayers have all the essential information related to the administration of the capital gains tax in the event the tax is ruled constitutional."
So, it appears they used the reasoning that they wanted to be ready in advance, in case it is ruled on favorably for the state.
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