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The Strange, Short Story Of Washington State’s Income Tax

Illustration by Drew Christie
In 1933, Washington state had an income tax. So what happened?

What is the history of Washington state's political allergy to an income tax? Steven Thomson of Olympia posed this question toKUOW's Local Wonder.

We had an income tax once in Washington state.

It was during the Great Depression, and a lot of people were down and out.

People were so excited about the income tax that they voted twice. First, they changed the state constitution to allow the tax. Then voters approved the tax – 70 percent in favor.

“It was more popular on that ballot than bringing back the sale of beer,” said Geoff Crooks, former commissioner of the Supreme Court.

Times were so desperate that a dozen legislators shared a boarding house with a single bathtub. The governor lent them his old suits because they didn’t have proper clothing for the legislative chamber.

Hunger marchers went to Olympia twice that year, begging for aid. Farmers supported the income tax because the state leaned hard on property taxes. Farmers in the Depression were land-rich and cash-poor. They expected an income tax would barely apply to them, while slashing the state’s reliance on property taxes.

But business people could see where this was leading. They would be expected to pay a lot. So they challenged the tax in court, saying it couldn’t be legal.

It was 1933 when their challenge made it to the state Supreme Court in Olympia.

On the day of the hearing, a judge failed to appear. His name was Emmett Parker, and he had a heart condition that prevented him from showing up.

Without him, the judges deadlocked. Four in favor, four against.

But the state needed a decision. Tax forms were already being mailed out and the governor, a Democrat named Clarence Martin, needed to press ahead. So he appointed a new judge who was sure to cast his vote in favor of the income tax.

“Everybody expected that the court would uphold the income tax,” said Hugh Spitzer, a law professor at the University of Washington. “But lo and behold, when it was reargued they voted it down five to four.”

[asset-images[{"caption": "One of the Washington state justices may have gotten cold feet and switched his vote -- perhaps after receiving his income tax form in the mail.", "fid": "121530", "style": "placed_wide", "uri": "public://201510/LocalWonderJudges_0.png", "attribution": "Credit Illustration by Drew Christie"}]]The income tax was dead.

In the time between the two votes, something significant happened: People had received their income tax forms in the mail.

Suddenly the tax wasn't just a theory. The form was daunting, and newspapers suggested people might need professional help to fill out the form.

People who thought they were exempt because of their low incomes worried they would have to pay.  

But did the arrival of tax forms change a Supreme Court verdict?

Spitzer says he spoke with one of the last known witnesses to the proceedings – a lobbyist named Charles Hodde.

“Charlie told me that he was quite sure that what really happened in 1933 is that the judges received their tax statements in the mail before they had decided the case,” Spitzer said.

“Once they took a look at their tax statements – of course judges got paid, they had decent jobs – and then some judge decided he didn’t want to pay that tax."

Of course, that’s according to Charlie.

We do know for sure that one of the judges changed his mind. That judge was likely Oscar Holcomb. He's the one who wrote the decision that declared that the income tax violated the state constitution. 

It’s a strange decision, because on the same day the income tax died in Washington, the state Supreme Court approved another income tax. It’s the business and occupations tax, known as the B&O, which taxes a business on its gross income.

What's your Local Wonder question?

Standing in front of Justice Holcomb’s portraits at the Supreme Court recently, Crooks read aloud from the B&O decision.

“It may be that we have, in some prior case, used language not wholly consistent with our present views,” he read. “This is an emergency measure … it will be but temporary.”

Crooks burst out laughing.

"It's hard not to laugh,” Crooks said, “because it's still one of the principal taxes we rely on."

Elsewhere, the movement toward an income tax took off. Eighteen states moved to an income tax during the 1930s.

But Washington clings to its 1935 tax system.

A state income tax has come up for a vote seven times since that Supreme Court decision.

Every time, voters have rejected it.

Submit any question about Seattle, the Puget Sound region, or its people via the form below. Every month, KUOW editors pick three questions and ask our listeners to vote on their favorite. Whichever question gets the most votes is then investigated by a KUOW reporter.