OLYMPIA, Wash. – Washington state’s Supreme Court has upheld the state’s new capital gains tax.

In a 7-2 decision, the justices found the tax to be an excise tax, not a property tax, which the state Constitution limits to 1% annually, or an income tax, which Supreme Court decisions dating to the 1930s have found unconstitutional.

The capital gains tax was adopted by lawmakers in an effort to balance what is considered the nation’s most regressive tax code.

Washington is one of nine states without an income tax, and its heavy reliance on sales and fuel taxes to pay for public expenses falls disproportionately on low-income residents.

Democrats in Olympia, led by Governor Jay Inslee, sought to begin addressing that in 2021.

They enacted a 7% capital gains tax on the sale of stocks, bonds and other high-end assets, with some exemptions.

It was expected to be paid by 7,000 people and to bring in close to a half-billion dollars a year to help pay for public education.

But it faced a legal challenge from wealthy residents and organizations that said it violates the state and federal constitutions and would discourage the investment in the state.