Constitutions don’t enforce themselves. That’s why James Madison called them “parchment barriers.” While there are plenty of examples of this at the federal level, it’s worth looking at a situation at the state level that perhaps demonstrates this even more so.
Despite the clear intent of the state constitution, the Washington Supreme Court recently upheld an illegal capital gains income tax by simply changing the definition of a few words and declaring the tax to be legal.
To understand how absurd the situation is, you need to know a little about Washington’s history.
Under the Washington State Constitution, property can only be taxed at a uniform rate. That means the state property tax must be the same rate regardless of where you live. Back in the early 1900s, there was an effort to tax other types of intangible property, such as income. The problem was that as written, the state constitution required intangible property to be taxed at the same rate as tangible property like real estate. Having a 6 percent tax on property and income from stocks and bonds wasn’t what proponents had in mind.
So, in the 1930s the fourteenth amendment to the Washington State Constitution was approved by voters allowing for different property tax rates for separate classes of property. It also included a definition of property as “all things tangible and intangible, subject to ownership.” The pro-amendment section of the voter pamphlet at the time made it clear that its purpose was to allow the taxation of income at a different rate than other tangible property.
In the 1933 Washington Supreme Court decision in Culliton v. Chase overturning a progressive income tax, the high court wrote that “it would certainly defy the ingenuity of the most profound lexicographer to formulate a more comprehensive definition of ‘property’ than that found in the Washington state constitution. Income is either property under our fourteenth amendment or no one owns it. If that is true, anyone can use our incomes who has the power to seize or obtain them by foul means.”
In the decades that followed, the Washington Supreme Court repeatedly held that a progressive income tax was illegal in Washington state due to these two constitutional provisions. At the same time, voters consistently rejected proposals for a progressive income tax at the ballot box.
After a progressive income tax failed at the ballot box yet again in 2010 via Initiative 1098, a movement grew attempting to enact it through the courts instead of a constitutional amendment. Proponents hoped a politically-friendly court would rule on ideological grounds rather than jurisprudence. In 2017, the city of Seattle approved a local income tax that was challenged in court, and though it was overturned by a court of appeals, the Washington Supreme Court refused to take up the case.
Then in 2021, the state legislature enacted a capital gains income tax above a certain income threshold – except there was a catch. They didn’t call it an “income tax.” Instead, they described the tax on the income derived from the sales of capital gains as an “excise tax.”
As former government reform director at the Washington Policy Center Jason Mercier extensively documented, there’s no such thing as a capital gains excise tax. By definition, an excise tax is paid regardless of whether a profit is made from the sale. Washington state’s capital gains “excise tax” only applies when the sale nets profit.
No state imposes an excise tax on capital gains, and the Internal Revenue Service itself insists a capital gains tax is an income tax.
You’d think the new tax wouldn’t stand a chance, and if it actually made it to the state’s highest court, the judges wouldn’t uphold it.
But that’s exactly what happened.
In its opinion, the Washington Supreme Court simply reiterated that it was an excise tax because, well, they said it is and the state tax system is racist so they need this tax. If you think that’s an exaggeration, read the majority opinion yourselves. It is perhaps one of the worst legal arguments you’ll ever encounter.
While there is an ongoing lawsuit to overturn the tax for violating the U.S. Constitution, it’s irrelevant to the point here. What should have been an ironclad constitutional restriction on a certain type of tax was demolished, not through amending the constitution to allow for a progressive income tax, but through judicial fiat and word magic. The judges literally declared that words that mean one thing now mean something else in order to circumvent the meaning of a written constitution.
What makes it even more inexcusable is that, unlike the U.S. court system, Washington Supreme Court judges are elected and can be removed. So can the legislators who proposed and voted for an illegal tax. But when left to themselves, none of these branches of government maintained the rule of law.
All of it could have been avoided if voters had been more vigilant to protect and defend the state constitution because, just like the U.S. Constitution, it does not and will never enforce itself.
Washington residents likely face learning this lesson the hard way via a potential income tax on all levels of income. Americans elsewhere would do well to learn by their example.
TJ Martinell | The Tenth Amendment Center
