The Seattle Tax Fight
Washington is one of seven lucky U.S. states that don’t have an income tax, and one reason is that its state law greatly limits the authority to introduce one. “A county, city, or city-county shall not levy a tax on net income,” reads the statute.
Then again, when have progressive warriors let a little thing like legality stand in their way? Certainly not in Seattle, where the City Council last month passed 9-0 an ordinance imposing an income tax on high-income residents despite the black-letter law. Individuals in Seattle with incomes above $250,000 and couples with more than $500,000 will now pay a 2.25% tax.
To get around the language of state law, Seattle’s solons claim that they passed a tax on “total income” as defined by the amount reported on line 15 of the IRS Form 1040A tax form or line 22 of IRS Form 1040. One problem: These lines from the federal tax forms in fact represent net income. That’s because the amounts listed are after various deductions and exclusions, such as exempt interest or expenses.
In addition, the Washington state constitution says that “all taxes shall be uniform upon the same class of property.” In 1933 Washington’s state Supreme Court ruled that property included income, meaning a progressive tax is unconstitutional.
In light of the strong statutory and constitutional case against Seattle’s new tax, a local think-tank known as the Freedom Foundation has sued the city as an “assault on the rule of law.” Not to mention the clear will of Washingtonians, who rejected a ballot measure for an income tax aimed at the wealthy as recently as 2010. The campaign was led by Bill Gates Sr. and was well funded by labor unions but lost 64%-36%.
Never mind. This latest tax-the-rich initiative comes courtesy of an outfit called Trump Proof Seattle, a coalition of progressives and public unions. Its main idea, endorsed by Mayor Ed Murray, is that a new income tax targeting high earners advances the general progressive goal of “fairness” while the estimated $140 million in new revenue it would raise would insulate the northwest city from any potential federal budget cuts (not that those are coming).
But this is about more than revenue for the city. The city councilors even welcome the litigation, because the larger goal here is opening a path to a statewide income tax. And the path becomes much easier if the state Supreme Court takes advantage of this litigation to reverse its 1933 ruling.
As the Freedom Foundation notes in its suit, there is no need for the court even to go to the constitution. Statutory law and the city charter make it abundantly clear that the Seattle City Council lacks the legal authority to impose such a tax, especially without a vote of the people. But as with so many progressive policies these days, the City Council and mayor are counting on the courts to override the voters and impose a manifestly illegal tax.
Appeared in the August 21, 2017, print edition.