Washington State's High Court Upholds Tax on Big Banks

By:
Ruth Singleton
Published Date:
Sep 30, 2021
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The Supreme Court of Washington state unanimously upheld a state tax on big banks on Thursday, AP reported. The 1.2 percent surtax, passed by the state Legislature in 2019, is intended to provide essential services and to address disparities in wealth and income as well as the state’s regressive tax code.
 
The surtax applies to banks that make more than $1 billion in annual profits; it is assessed only on the banks' economic activity in Washington. The banking industry challenged the tax, arguing that it targeted out-of-state banks in violation of the Constitution's commerce clause. Specifically, the Washington Banking Association and the American Banking Association noted that 150 out of the 153 financial institutions that had to pay the tax are located out of state. But the justices rejected that argument, reversing the trial court below. Justice Barbara Madsen wrote, “It applies equally to all financial institutions meeting the $1 billion income threshold, irrespective of whether they are based inside or outside of Washington.”
 
Washington state legislators said that they designed the surtax in order to make the taxation system more progressive, after finding that the state's middle class and poor residents pay two to six times as much of their income in taxes as the wealthy do.

The banking plaintiffs may decide to seek U.S. Supreme Court review of the decision. given the interstate commerce issue raised in the case.

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