U.S. Supreme Court won't review challenge to Washington's capital gains tax

The U.S. Supreme Court has declined to review a lawsuit challenging Washington’s capital gains tax.

The suit in question is Quinn v. Washington, which challenges the state’s excise tax on capital gains passed by the State Legislature in 2021. The tax has faced several challenges, and was previously ruled constitutional by the Washington State Supreme Court in March 2023.

It is a 7% tax on the sale of stocks and assets over $250,000 annually. The first $500 million of revenue will go to education, with additional proceeds going to a school construction fund.

The entire purpose of the tax, as described in RCW 82.87.010, is to correct the state’s "regressive" tax system, by aiming to make wealthier residents pay more than lower-income residents.

Legislators found that low-income residents pay at least six-times what wealthy residents pay, and middle-income families pay four-times more in taxes as the state’s top earners, when measuring percentage of household income.

In its first year, the tax brought in $900 million in revenue, according to progressive PAC Invest in Washington Now. Even though the Supreme Court will not review the lawsuit, the tax could face more challenges at the state level.

Conservative PAC Let’s Go Washington has already filed ballot measure I-2109 to repeal the excise tax.

Meanwhile, progressives are celebrating the victory.

"The U.S. Supreme Court’s decision today was a huge victory for Washington kids and families," wrote Treasure Mackley with Invest in WA Now. "This decision could not have come at a more critical time as school districts across the state are facing funding shortfalls."