Washington’s Supreme Court issued an opinion today upholding the constitutionality of the hazardous substances tax (“HST”) imposed by the voter-approved Model Toxics Control Act. The HST is imposed by MTCA at a rate of seven tenths of one percent on the first in-state possession of any hazardous substance (including gasoline), calculated on the wholesale value of that substance. The purpose of this tax is to fund environmental projects such as remediation of contaminated sites, stormwater pollution reduction and to help with the proper disposal of hazardous substances. Its been around since MTCA was approved by voters more than 22 years ago–but has become a bit of a hot-button issue over the past few years as parties have sought to increase the tax rate to fund stormwater projects, and legislators have eyed the fund as a way to finance non-environmental projects in a time of tight budgets.
The centerpiece of the current litigation over the constitutionality of the HST is Article II, Section 40 of the Washington Constitution, which reads in relevant part:
All fees collected by the State of Washington as license fees for motor vehicles and all excise taxes collected by the State of Washington on the sale, distribution or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes, shall be paid into the state treasury and placed in a special fund to be used exclusively for highway purposes.
Provided, That this section shall not be construed to include revenue from general or special taxes or excises not levied primarily for highway purposes, or apply to vehicle operator’s license fees or any excise tax imposed on motor vehicles or the use thereof in lieu of a property tax thereon, or fees for certificates of ownership of motor vehicles.
I’ve italicized the language this case turned on. The parties challenging the constitutionality of the HST argued that the HST was a gas tax (because it applies to petroleum products, a hazardous substance under MTCA), and therefore the revenues generated by the HST needed to be applied to state highway projects, not environmental purposes. The defenders of the HST argued–successfully–that the HST was never “intended to be used for highway purposes” and therefore did not run afoul of Article II, Section 40.
What are the implications of this case? First, the HST will continue in existence, meaning Washington consumers will continue to pay about three cents a gallon on gasoline, and the fund will continue to be available for projects it is meant to be used for. Second, this likely will pave the way for renewed legislative efforts to increase the HST (like the efforts in 2010 to raise the rate as high as two percent). Washington is facing some expensive cleanups in the form of the Duwamish Waterway and in the form of new municipal requirements for controlling stormwater (among other things), and the continued availability of the HST may prove an important source of funds for these types of projects. Finally, as my friend and fellow environmental attorney Ken Lederman points out over on Publicola, this ruling clarifies that petroleum products can be taxed for purposes other than building public highways–potentially opening the door for new taxes to fund non-highway transit projects such as rail, street cars, buses, and even things like bike paths.