A history of the income tax in Washington state
Faced with the state’s current budget crisis, lawmakers have raised the possibility of an income tax. The idea has been debated for years, but this 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.
But is an income tax constitutional? Would the law require a constitutional amendment? These are questions lawmakers are now wrestling with. The state income tax has had a troubled history in Washington, and any new proposals would have to clear the exceedingly-high hurdles of constitutional review and voter approval. The Washington Supreme Court has struck down numerous income tax laws, and voters have rejected eight measures in the last 75 years.
- 1932 – Voters adopt a graduated income tax. Initiative No. 69.
- 1933 – Supreme Court strikes down the income tax as unconstitutional. Culliton v. Chase.
- 1934 – Voters reject constitutional amendment allowing for income tax.
- 1935 – Legislature adopts a 3% net income tax. Personal Net Income Tax Act of 1935.
- 1936 – Supreme Court strikes down Personal Net Income Tax Act. Jensen v. Henneford.
- 1936 – Supreme Court strikes down corporate net income tax. Petroleum Nav. Co. v. Henneford.
- 1936 – Voters reject constitutional amendment SJR 7 allowing for income tax.
- 1938 – Voters reject constitutional amendment SJR 5 allowing for income tax.
- 1942 – Voters reject another income tax measure.
- 1951 – Legislature adopts a 4% corporate excise tax. Laws of 1951, Extraordinary Session, chapter 10.
- 1951 – Supreme Court rejects the corporate excise tax. Power, Inc. v. Huntley.
- 1970 – Voters reject constitutional amendment HJR 42 allowing for income tax.
- 1973 – Voters reject a HJR 37, providing for corporate and personal income tax, by a 3-to-1 margin.
- 1975 – Voters reject Initiative 314, a 12% corporate income tax proposal.
- 1982 – Voters reject Initiative 435, a corporate income tax proposal.
If the Legislature adopts an income tax, only one thing is certain: the issue will come before the Washington Supreme Court. Public finance attorney Hugh D. Spitzer of Foster Pepper has suggested that the common perception that an income tax is unconstitutional may not be accurate, as the case law guiding the Supreme Court in Culliton has since been overturned. But will that reassure lawmakers who have to sell the idea to the voters of Washington?
(Note: Phil Roberts has written an exhaustive review of the income tax in Washington state: A Penny for the Governor, a Dollar for Uncle Sam, 2002.)
