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Policy Highlighter April 7, 2009

2009 No. 9

Hold On: An Income Tax Faces Serious Constitutional Hurdles A proposal from Senator Jeanne Kohl-Welles has lawmakers in Olympia once again discussing the possibility of an income tax. The major hurdle any income tax has to clear is the question of whether the legislation would require a constitutional amendment. (Remember: constitutional amendments require two-thirds approval in the legislature and ratification by the voters of the state.) Apparently hoping to avoid this problem, several Democratic legislators have vocally asserted that a “modern” income tax is constitutional, and wouldn’t require any amendment. Frequently cited in this discussion is an analysis by public finance attorney Hugh Spitzer, which he wrote for the 2002 Gates Commission (Appendix B: Income Tax Constitutional Issues). Mr. Spitzer argues that the cases commonly thought to prohibit an income tax may no longer be good law, and that an income tax could now be accomplished without a constitutional amendment. Presented with a modern income tax, he says, the state Supreme Court would likely use a “clean slate” approach without the constraints of previous cases. A more thorough analysis would suggest otherwise. The Washington Constitution (art. VII, § 1) requires that taxation of property be uniform, a clause that was added to the constitution in 1930 by Amendment 14: “All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word ‘property’ as used herein shall mean and include everything, whether tangible or intangible, subject to ownership.”

Quick Summary •

Proponents of an income tax claim such a tax would be constitutional.

Previous cases dealing with the income tax are being mischaracterized.

Income falls within the constitutional definition of “property.”

The Washington State Supreme Court has rejected a progressive income tax as unconstitutional.

A progressive income tax would likely require a constitutional amendment.

  Michael Reitz is general counsel of the Evergreen Freedom Foundation. For more information, visit or call 360-956-3482. The Evergreen Freedom Foundation is a private, non-profit, public policy research organization in Washington State. Our mission is to advance individual liberty, free enterprise, and limited and accountable government. We do not accept government funds. This publication should not be construed as an attempt to support or oppose specific legislation.

Policy Highlighter

An Income Tax Faces Serious Constitutional Hurdles

One of the first cases to interpret this constitutional section was Culliton v. Chase (1933), in which the Washington State Supreme Court analyzed whether a graduated income tax, adopted by initiative the year before, was constitutional. The court said that personal income falls within the constitutional definition of “property,” and therefore must be taxed uniformly. As a result, the Supreme Court struck down the graduated income tax as unconstitutional. Hugh Spitzer suggests that Culliton is no longer good law, and can be ignored if the Supreme Court were to review an income tax today. Spitzer argues that the court in Culliton relied on the case of Aberdeen Savings & Loan Assoc. v. Chase (1930) to classify “income” as property. Aberdeen, in turn, relied on two U.S. Supreme Court cases that have since been overturned. Given this shaky foundation, Spitzer says, the Culliton ruling is in doubt, and a modern Supreme Court would not have to be constrained by these precedents. In practical terms, if income is no longer classified as “property” under the state constitution, the uniformity clause would no longer apply, and a graduated income tax could be accomplished without constitutional amendment.

Fourteenth Amendment, or no one owns it. … The overwhelming judicial authority is that ‘income’ is property and a tax upon income is a tax upon property.” The Supreme Court noted the unique language of the Washington Constitution by comparing it to other state constitutions. For example, the Wisconsin Constitution (art. VIII, § 1) explicitly authorized progressive taxation on income. The Idaho Constitution (art. VII, § 3) conferred upon the legislature the ability to define the word “property.” Had Washington the same constitutional provisions, said the court, it would likely find an income tax constitutional. But unless the constitution were amended, the court said the legislature’s hands are tied by the “emphatic restrictions” in the Washington Constitution. Given the Supreme Court’s reliance on the constitutional wording of Amendment 14, which is still intact, Culliton is still good law, and there is little reason to assume that the Supreme Court would ignore it and its subsequent line of cases.

Spitzer’s analysis ignores the true basis of the Supreme Court’s decision in Culliton, and leaves out some critically relevant facts. Regardless of the validity of Aberdeen, the Supreme Court in Culliton relied more on the unique character of our state constitution when classifying income as property. Just months after the Aberdeen decision issued, Amendment 14 added the uniformity clause to the Washington Constitution. When the Supreme Court considered the Culliton case three years later, the court took note of the “peculiarly forceful constitutional definition” of property in Article VII. “It would certainly defy the ingenuity of the most profound lexicographer to formulate a more comprehensive definition of ‘property.’ It is ‘everything, whether tangible or intangible, subject to ownership.’” With this expansive definition of property, the court held that income fell within that classification. “Income is either property under our page 2

2009 ph 9 income tax constitutional hurdles  
2009 ph 9 income tax constitutional hurdles