The state Supreme Court recently accomplished something the Legislature failed to do, and it could mean the survival of dozens of family-owned businesses and farms in rural King County.
In March 2000, when the King County Superior Court invalidated Initiative 695, the voter-approved measure to eliminate the motor-vehicle excise tax (MVET), the Legislature acted. Despite the $750 million to be lost each year in revenue, legislators came together to honor the will of our voters and passed Senate Bill 6865 to repeal the MVET.
One year later, when Congress voted to phase out the federal estate tax by 2010 and reduce the credit allowed for state taxes until it was gone by 2005, the political will to fix Washington’s estate tax law wasn’t there – even though Washington voters had repealed the state’s inheritance tax in 1981 and replaced it with a credit against the federal estate tax.
Because the state’s estate tax law was tied to federal law before the 2001 change, the state Department of Revenue continued to collect the state tax under the law that existed before 2001. I prime-sponsored one of the bills to fix this problem and lift this onerous tax burden, only to see it suffer a death at the hands of partisan politics.
When the post-9/11 recession hit and the state faced a huge deficit, it became even harder to get lawmakers to talk about creating another hole in general fund revenues.
The result? The people of Washington have had to live with this backdoor tax because of a failure to act. What the Supreme Court said in its Feb. 3 opinion is that a new tax burden can only be created by a law that states such a purpose – not out of a failure to act. This is exactly what bills sponsored by myself and others would have clarified if they had passed.
The court decision now puts an end to Washington’s estate tax and means people who have paid the tax since Jan. 1, 2002, will get their money back.
It may be too late for some owner-operated businesses and family farms whose inheritance tax obligation shut them down, but at least from now on these enterprises have a chance to support another generation.
We have worked since 2001 to tie Washington’s law to the federal law after it was changed. We introduced a bill this year yet again, hoping this time we would be able to set things right.
Now, with the Supreme Court’s ruling, no legislative action is needed. The state’s death tax has finally been buried. I hope this change will have the positive impact on dozens of family-owned businesses and farms in rural King County that my original legislation intended.
Cheryl Pflug (R-Hobart) is the state senator for Washington’s 5th District.