Today is the last day of the 1st Special Session for lawmakers to finish work on the 2013-15 budget. So where do we stand? Here are the thoughts of House Majority Leader Rep. Sullivan (D) as quoted in The Olympian:

“We are still pretty far apart,” Sullivan said, noting that Gov. Jay Inslee had said last month that the chambers were light years apart. “I would say we are still somewhere out in space.’’

With budget negotiations apparently “Lost in Space” and a 2nd Special Session around the corner, another strange phenomenon is manifesting in Olympia – “The Twilight Zone” of retroactive tax policy.

To paraphrase one of the openings of “The Twilight Zone” – There is a fifth tax dimension beyond that which is known to man. It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science and superstition, and it lies between the pit of man’s fears and the summit of his knowledge. This is the dimension of the Olympia taxman. It is an area which we call “The Tax Twilight Zone.”

Among the various tax bills still in play is a proposed “fix” to a State Supreme Court ruling which created a hole in the state’s stand alone death tax (estate tax). Here is the history of the various court rulings and legislative response from the bill report for HB 2064.The bill being considered would not only address the Court’s ruling going forward but also make retroactive changes to the law going back to deaths since 2005.

While using death as a trigger for tax liability is poor tax policy the voters in 2006 did re-affirm the Legislature’s creation of a standalone death tax by rejecting I-920 to repeal it. Legislative Democrats have pointed to I-920’s 62% rejection in 46 of 49 legislative districts as proof of the voters’ support. Oddly enough, however, they haven’t been quick to point out I-1185’s (2/3 for taxes) 64% statewide passage last year in 45 of 49 legislative districts as also being the will of the people (that and the fact the 2/3 for taxes policy has been approved by voters five separate times while the death tax has had mixed voter response at the ballot).

That said, while voters re-affirmed the standalone death tax, it is doubtful they meant to give the Legislature a green light to embark down the road of retroactive tax changes, especially for people no longer around to defend themselves due to their death.

The Washington State Bar Association is also questioning the constitutionality of making retroactive changes to tax law. Here are the comments of Kathyrn Leathers expressing the WA Bar Association’s concerns: (Click here for video)

While the debate on whether to tax death has been recently answered by Washington voters, lawmakers should not open the door to “The Tax Twilight Zone” of retroactive tax policy. Changes to tax law should be prospective and those to be taxed should actually be around to have a voice in the process.


[Reposted with permission from the Washington Policy Center blog]