Washington Supreme Court upholds effort to balance tax code

SEATTLE (AP) — The Washington Supreme Court on Friday upheld the state's new capital gains tax, which was adopted by lawmakers in an effort to balance what is considered the nation's most regressive tax code. 

In a 7-2 decision, the justices found the tax to be an excise tax — not a property tax, which the state Constitution limits to 1% annually, or an income tax, which Supreme Court decisions dating to the 1930s have found unconstitutional. 

“For 134 years, Washington state has been waiting for the day when a fairer tax system came about, one where working people were not carrying an inequitable share of the burden," Gov. Jay Inslee, a Democrat, said in a statement. “Today is that day. Washington’s capital gains tax helps right an upside-down tax structure where low-income Washingtonians ultimately expend a much larger share of their income in taxes than our wealthiest residents.” 

Washington is one of nine states without an income tax, and its heavy reliance on sales and fuel taxes to pay for schools, roads and other public expenses falls disproportionately on low-income residents. They pay at least six times more in taxes as a percentage of household income than the wealthiest residents do, according to lawmakers. Middle-income residents pay two to four times as much.