The Central Puget Sound Regional Transit Authority, “Sound Transit,” may continue to charge car-tab taxes at current rates of up to hundreds of dollars per vehicle, despite a class-action lawsuit that claimed the law is unconstitutional, the Washington Supreme Court has ruled.
In 2015, the legislature enacted a motor vehicle excise tax (MVET) authorizing Sound Transit to use two separate depreciation schedules to calculate MVET, including the 1996 depreciation schedule intended to pay off Sound Transit's bond contracts, and the 2006 depreciation schedule.
In June 2018, eight taxpayers sued arguing that vehicle owners in Snohomish, King and Pierce counties were owed refunds of $240 million because of the unlawful imposition of the tax.
In November 2016, 54 percent of voters in these counties approved a $54 billion ST3 program, the most expensive transit measure in the U.S. By doing so they increased the median household’s combined car-tab, sales and property taxes by $325 every year.
ST3 includes building 62 miles of light rail and two major bus-rapid transit lines over the next 25 years. Once completed, the network would be comparable in length to the Metro in Washington, D.C.
Plaintiffs Taylor Black and other taxpayers allege the MVET statute violates article II, section 37 of the Washington Constitution, which states "[n]o act shall ever be revised or amended by mere reference to its title, but the act revised or the section amended shall be set forth at full length."
By a vote of 7-2 , the justices disagreed, upholding the argument of Sound Transit, and allowing the taxation scheme to continue.
In its opinion published Thursday, the court found the MVET statute to be constitutional because “the statute is a complete act because it is readily ascertainable from its text alone when which depreciation schedule will apply,” it “properly adopts both schedules by reference,” and “does not render a straightforward determination of the scope of rights or duties established by other existing statutes erroneous because it does not require a reader to conduct research to find unreferenced laws that are impacted by the MVET statute.”
Sound Transit, a public agency serving the Seattle metropolitan area, operates light rail service in Seattle and Tacoma, regional Sounder commuter rail, Sound Transit Express bus service, and manages the regional ORCA fare card system.
Joel Ard, an attorney representing the plaintiffs, said the court’s ruling could have farther reaching consequences beyond Sound Transit’s taxing authority.
“Allowing the Legislature to draft a statute in this way and green-lighting all the sort of convolutedness of this section of the code really opens up the door for extraordinary mischief in statutory drafting,” he said.
In response, Gov. Jay Inslee said, “I think the Legislature ought to be open about doing something different with the valuation system to resolve people’s concerns about that. But when they do that, they will need to find some other way to plug the holes in the budget that would otherwise occur, and I’m happy to work with them to do that.”
State Sen. Steve O’Ban, R-University Place, introduced legislation to enact $30 car tabs. He said the ruling underscores the importance of the legislature to not leave issues like this up to the court to decide.
“The Legislature has the power to give taxpayers the relief they demanded by passing I-976,” he said, which would also allow Pierce County to exit from the ST3 project.
Most in Pierce did not support ST3 although they were folded in with the other two counties that voted to extend the project.
According to an analysis by the Washington Policy Center, Sound Transit will “collect $1.6 billion in MVET overcharges from taxpayers over the course of three decades, should the taxes end in 2028 as promised.”
According to the Seattle Times, Sound Transit has used an inflated car-depreciation schedule based on laws enacted in 1996, and later revised in 1999, which overvalue newer cars by as much as 25 percent of their market value.
“For instance, the matrix overvalues a year-old car at 95 percent of the sticker price when market rate is near 70 percent, and a 5-year-old car at 65 percent of sticker price when the market is near 39 percent,” it reports.
According to Sound Transit’s financial plan and proposed budget, the cost to taxpayers in 2020 alone is $355 million.