| Editorial: Court should let state death tax die 11/12/04 In 1981, the voters of Washington passed Initiative 402 by more than 67 percent of the vote. The measure tied the state death tax — a tax on the estates of people who have died — to the federal death tax. When they figured the federal tax, people could subtract the state tax up to an allowable credit. Washington set its tax at the allowable credit, so that 100 percent of the state tax could be subtracted from the federal tax. That made the state tax invisible. In 2001, Congress began reducing the credit for state taxes, and the credit ends Dec. 31. According to the initiative passed 23 years ago, the state death tax should also end Dec. 31 — but it doesn't. In 2002, the state Department of Revenue announced that it was collecting the old tax anyway. Washington's death tax is no longer invisible. It is in addition to federal taxes, in some cases when no federal tax is owing at all. How does the Department of Revenue justify this? The department says it is following a law passed in 2001, which links the state tax code to a certain version of the federal tax code. That law, opponents say, was supposed to be a housekeeping measure, an update only, with fiscal impact of zero. It was a bill to which no legislator paid attention, and passed unanimously. Now a group of heirs that has had to pay the state tax has sued. On Sept. 30, they argued their case before the Washington Supreme Court. That court has not yet ruled. How strong their legal case is we do not know, but we hope they prevail. For us, the reason to dislike a death tax is that it forces the owners of a family business to waste capital on estate planning and insurance, or eventually sell. Over time, the death tax replaces owners with corporate managers, and local companies with chains. Nor do we like to see the people's vote overruled in such an offhand way. If I-402 is to be thrown out, do it openly. Or put the death tax on the ballot and let the people vote on it again.
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