Guest Editorial

State income tax...constitutional or not?



Faced with the state's current budget crisis, lawmakers have once again raised the possibility of a state income tax. The idea has bounced around Olympia for years, but this recent discussion is more than a mild flirtation. Senate Majority Leader Lisa Brown and House Speaker Frank Chopp have both signaled a willingness to test the voters' appetite for a new tax structure, and Sen. Jeanne Kohl-Welles introduced a bill taxing anyone making over $500,000.

But is an income tax constitutional? Would the law require a constitutional amendment? These are questions lawmakers are wrestling with. Any proposal would have to clear the exceedingly-high hurdles of constitutional review and voter approval.

The personal income tax has quite a rap sheet in Washington. Since the state Supreme Court threw out a measure in 1933, voters have rejected every subsequent personal or corporate income tax proposal. That's eight times, if you're counting.

On the legal question, most income tax proposals would require an amendment to our state constitution. The constitution currently requires that all taxation be "uniform," and a progressive income tax, where higher incomes are taxed at a higher rate, would violate this uniformity requirement. But constitutional amendments are no walk in the park. The legislature must approve the amendment by a two-thirds vote, and the voters of the state have to ratify the change.

Apparently hoping to avoid this problem, several Democratic legislators have vocally asserted that a "modern" income tax is constitutional, and wouldn't require any amendment. Lawmakers and their experts argue that the cases commonly thought to prohibit an income tax may no longer be good law.

One of the landmark tax cases is Culliton v. Chase, decided by our state Supreme Court in 1933. Striking down a progressive personal income tax, the court said that personal income falls within the constitutional definition of "property," and therefore must be taxed uniformly. This ruling has guided the Supreme Court in striking down subsequent income tax measures.

Income tax proponents are now attacking the validity of the Culliton case. They say it relied on an earlier 1930 state case, which in turn relied on two U.S. Supreme Court rulings that have since been overturned. Given this shaky foundation, the argument goes, the Culliton ruling is in doubt, and the Supreme Court would not be constrained by its own precedent. In practical terms, if income is no longer classified as "property" under the state constitution, a progressive income tax could be accomplished without constitutional amendment.

This argument is misleading. When the Supreme Court considered the Culliton case, the court took note of the "peculiarly forceful constitutional definition" of property in our state constitution. "It would certainly defy the ingenuity of the most profound lexicographer to formulate a more comprehensive definition of 'property,'" said the court. "It is 'everything, whether tangible or intangible, subject to ownership.'" With this expansive definition of property, the court held that income fell within that classification. "Income is either property under our [constitution], or no one owns it."

The Supreme Court noted the unique language of the Washington Constitution by comparing it to other state constitutions. For example, the Wisconsin Constitution explicitly authorized progressive income taxes. The Idaho Constitution gave the legislature the ability to define the word "property." Had Washington the same constitutional provisions, said our Supreme Court, it would likely find an income tax constitutional. But unless the Washington Constitution was amended, the court said the legislature's hands are tied by its "emphatic restrictions."

Given the Supreme Court's reliance on the constitutional wording, which is still intact, Culliton is still good law, and there is little reason to assume that the Supreme Court would ignore it.

In other words, lawmakers won't be able to duck a constitutional amendment.

- Michael Reitz is general counsel of the Evergreen Freedom Foundation, a free-market policy organization in Olympia.


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