In Washington State, a capital gains tax was passed by the Legislature and went into effect Jan 1, 2022. The constitutionality of the law is currently being challenged in Douglas County court.
(Digression: the argument against the law being that income taxes are prohibited by WA’s constitution; the argument for the law’s constitutionality is that capital gains are considered property, and property taxes are constitutional.)
What typically happens in cases like this if the law is deemed unconstitutional and that ruling is then appealed to a higher court? Is the tax still able to be collected in 2022 if, for example, the appeal isn’t heard until 2023?
I guess what I’m asking is this: Would the court’s (hypothetical) ruling that the law is unconstitutional make it “not a law”?
Any insights / examples of how this might work would be great.
Yes, usually. If a lower court rules that a law is invalid, it should not be in force until and unless a higher court reverses that decision.
ETA: The messier question is what happens if the lower court says this tax is fine and the State starts collecting it, and a higher court reverses that decision.
I’m not a law-talking person, but I believe this is where a “motion to stay” comes into play. It’s a request to withold implementing or enforcing the order or judgement until the appeal is decided. The judge isn’t obligated to grant it.
That said, istm that the current status of the law would depend on whether it has been stayed from enforcement, pending resolution of the challenge. I also suspect that the ultimate determination won’t take place until the case has been heard by the SCOTSOW.
I’d be surprised to learn that enforcement of the law has NOT been stayed by the current level of the court system, even before a ruling on its constitutionality. But it would be interesting to know if (in the event that the challenge is struck down) the taxes owed will begin to accrue from the date the law was scheduled to go into effect, or from the date that SCOTSOW upheld the law.
I’ll go away now, and cede the floor to the law-talking guys.
There’s a similar case here, where a toll increase is in court. What they are doing is collecting the increased tolls, but putting the money into escrow. So it can’t be spent until legal issues are resolved, and if they find the toll Increase illegal, it will be returned to the people. (Somehow.)
It depends on WA state law. There seems to be no federal question here at all. So under WA law does a court typically suspend its judgment on appeal? Does the appellate court do so? All questions of WA law.