Washington state AG challenges IRS Definition of ’Income’
Marisa Lloyd

Washington state AG challenges IRS Definition of ’Income’

The Center Square

(The Center Square) – Washington state’s attorney general is raising concernes about what Jason Mercier has to say about the new capital gains income tax that went into effect January 1

The new law levying a 7% tax on capital gains above $250,000 for individuals and joint filers from the sale of assets such as stocks and bonds is the subject of a lawsuit to determine if it is an excise tax or an income tax. And if the latter, whether income is property as defined by the state constitution and subject to its uniformity clause.

In a January 7 brief, the Attorney General’s Office asked the judge in the case to strike from the court record Mercier’s capital gains income tax declaration, including all correspondence he has had with the Internal Revenue Service (IRS) and state revenue departments from across the country describing a capital gains income tax as an income tax.

Mercier is the director of the Center for Government Reform at the Washington Policy Center.

“Plaintiffs generally rely on the Mercier declaration for their statements of out-of-state ‘authority,’” the brief reads. “But the Mercier declaration consists of collected correspondence with various non-judicial state and federal employees across the country, all of which are inadmissible hearsay. ‘A court cannot consider inadmissible evidence when ruling on a motion for summary judgment.’ Dunlap v. Wayne, 105 Wn.2d 529, 535, 716 P.2d 842 (1986). Defendants move to strike the Mercier declaration and its exhibits in their entirety.”

Along with asking the court to strike Mercier’s declaration, the Attorney General’s Office goes on to argue, “First, whether the capital gains excise tax is a property tax under Washington’s Constitution is a matter of Washington law, not an issue determined by the vagaries of other jurisdictions’ tax laws... The Court need not follow Plaintiffs down their ‘other jurisdictions’ rabbit hole.”

“The brief speaks for itself,” Aho Brionn, spokesperson for the Attorney General’s Office said in an email response to The Center Square asking for comment on characterizing an IRS letter, documented emails with state revenue departments, and Washington state public records as “hearsay.”

Mercier was not happy about his research being challenged.

“The state’s brief may ‘speak for itself but so does the IRS and every other state in the country when they unequivocally say a capital gains tax is an income tax,” he said in an email to The Center Square. “I understand this may be an inconvenient truth for the Attorney General, but the facts are the facts, even if the state wants to hide them from the court record.”

A summary judgment hearing is set for Feb. 4.

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