Cargill to pay $70,000, plus legal fees, to Washington environmentalists

Washington state attorneys sought Wednesday to scuttle a lawsuit filed by farmers and others against the state’s new capital gains tax, arguing no one can challenge it until they pay it.

Farmers are only speculating that beginning next year they will owe the 7% tax on capital gains over $250,000, Solicitor General Noah Purcell told a Douglas County Superior Court judge.

Taxpayers could seek a refund, but until then they don’t have standing to claim the tax is unconstitutional, Purcell said. “They can’t yet know if they will actually owe the tax.”

Former state attorney general Rob McKenna, representing Washington Farm Bureau members, said the looming tax already influences estate planning. “There’s nothing speculative about this case,” he said.

McKenna said the state was trying to avoid judicial review of the tax, which the state anticipates will be paid by about 7,000 taxpayers who will collectively owe $500 million.

“If this isn’t a substantial question of public importance, I don’t know what is,” McKenna said.

House and Senate Democrats passed the tax this year at the request of Gov. Jay Inslee. Democrats say the tax will raise money for education and make the state’s tax code more fair by tapping the wealthy.

Income from selling farmland is exempt from the tax, but farm groups say the tax will hit farmers who sell their shares in partnerships that own farms.

The Farm Bureau and a conservative think tank, the Freedom Foundation, filed lawsuits in Douglas County in Central Washington. The suits have been merged into one case.

The county’s only Superior Court judge, Brian Huber, said he will issue a written ruling on the state’s motion to dismiss the suits.

Huber said during the hearing that he expects the tax’s constitutionality to eventually be decided by the state Supreme Court.

The Farm Bureau and Freedom Foundation argue the tax violates the state constitution’s prohibition against taxing some income differently than other income.

The state argues that the tax is on the transaction of selling capital assets and not on the income.

The state also has moved to have the case transferred to Thurston County Superior Court in Olympia.

Wenatchee lawyer Allison Foreman, who represents farm groups that submitted an amicus brief opposing the tax, said the case should stay in Central Washington.

“My clients live far away from Thurston County,” she said.