‘It’s a tax directed at everybody in WA’: Former justice unpacks millionaires’ income tax’s true intent

Nearly 1,000 pages of public records obtained by The Center Square show Washington’s attorney general and Democratic lawmakers worked together to design the state’s new millionaires’ tax as a test case to overturn a 1933 Supreme Court ban on income taxes.

Among those records is an August 27 email written by Senate Majority Leader Jamie Pedersen, D‑Seattle, who sponsored SB 6346, which Washington Governor Bob Ferguson signed into law last month.

“I would like to force the Washington Supreme Court to reconsider its caselaw that considers income to be property,” Pedersen wrote.

Former justice warns court won’t welcome having its hand forced

In light of the newly discovered emails, the former State Supreme Court Justice Phil Talmadge spoke with “The Gee and Ursula Show” on KIRO Newsradio to explain how he finds the strategy to be “troubling,” and warned that the income tax will not stop at those making more than $1 million each year.

“I think it’s going to be troubling to the court. The court doesn’t like to have its hand forced in any particular way,” Talmadge said. “I think the larger issue to look at here is, for the proponents of the legislation to talk about this as a millionaires tax now rings rather hollow. It becomes very clear that this isn’t a tax directed at millionaires. It’s a tax directed at everybody in Washington.

“Not to be lost sight of, this isn’t really overall tax reform. What we’re talking about is simply more revenue in this particular bill,” Talmadge continued. “We’re not talking about any particular tax changes that would make the tax system overall fairer. We’re not talking about major changes in the sales tax, major changes in the property tax. Rather, we’re just talking about more revenue in this particular piece of legislation that was enacted by the legislature.”

Talmadge said the real danger is that if the court sides with the legislature, the door would be wide open for an income tax on every Washington resident.

“If the court decides to change the definition of income as property, what that means is there’s no limitation on the ability of the legislature to impose an income tax on every single individual in Washington. Bottom line, this notion that it’s, quote, a millionaire’s tax is a misnomer, because they’ve made it very clear that it’s not. This is meant to be a test case. If they’re correct in their position, then anything can be taxed, as a graduated net income tax, no millionaire tax, it can go down to just about any and all of us.”

Talmadge breaks down 1933 ruling at heart of tax debate

Ursula asked Talmadge to unpack the 1933 ruling that keeps surfacing in the debate, specifically why income is treated as property and how solid that legal foundation really is.

“Our state constitution is really clear. It says you have to treat all classes of property the same,” Talmadge said. “So if you tax property at 1%, you tax income as property too, because the court determined that income was property. There’s this uniformity clause in the state constitution that applies. You could pass an income tax, a 1% income tax on everybody, and it wouldn’t defend the Constitution, but you can’t do a graduated net income tax the way the legislature proposed to do it.

“In 1932, the people of Washington passed an initiative to impose a graduated net income tax,” Talmadge continued. “It was challenged in court, and the Supreme Court said, ‘Nope, can’t do it.’ Legislature came back the next session and said, ‘Oh, we’re going to have an excise tax on property, and it’s going to be graduated. And the Supreme Court said, ‘Wait a minute, that’s an income tax.’ Two decisions from the early 1930s said this isn’t possible. If you want to do a 1% across-the-board income tax, yeah, you can do it. But that’s not what the legislature did here.”

Watch the full discussion in the video above.

Listen to Gee and Ursula on “The Gee and Ursula Show” weekday mornings from 9 am to 12 pm on KIRO Newsradio.