NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Monday, July 10th, 2017

City of Seattle adopts income tax on the wealthy; legal challenge coming

Seat­tle’s City Coun­cil has vot­ed unan­i­mous­ly to levy an income tax of 2.5 per­cent on high earn­ers, set­ting the stage for a pro­tract­ed legal bat­tle over whether local gov­ern­ments have the author­i­ty to pur­sue pro­gres­sive tax reform on their own.

Only income in excess of $250,000 would be sub­ject to the tax, which would fund:

  • reduc­tions in prop­er­ty and busi­ness and occu­pa­tion tax­es
  • solu­tions to our home­less­ness cri­sis
  • invest­ments in edu­ca­tion, afford­able hous­ing, and tran­sit
  • projects that lose mon­ey due to fed­er­al bud­get cuts
  • efforts to bring about a just and respon­si­ble tran­si­tion to clean ener­gy

Some pro­ceeds would also be ded­i­cat­ed to admin­is­ter and col­lect the tax. The pro­pos­al is sched­uled to go into effect on Jan­u­ary 1st, 2018.

The legal bat­tle will be well under­way before then. It will like­ly begin in King Coun­ty Supe­ri­or Court in the com­ing days, with an appeal being filed by the los­ing side to the Wash­ing­ton State Supreme Court. The bat­tle is cer­tain to draw a lot of inter­est; we expect a fair num­ber of ami­cus briefs will be sub­mit­ted at both stages.

Because income tax­es are based on abil­i­ty to pay, they are one of the most sen­si­ble types of rev­enue sources. Most states in the Union levy income tax­es (whether on indi­vid­u­als, cor­po­ra­tions, or both), includ­ing Wash­ing­ton’s east­ern neigh­bor Ida­ho, which is among the most con­ser­v­a­tive states in the coun­try.

Wash­ing­ton vot­ers enact­ed an income tax by pop­u­lar vote in the 1930s, but the Supreme Court ruled it could not be col­lect­ed in a ques­tion­able deci­sion that pro­gres­sives have been want­i­ng to over­turn ever since. Repub­li­can Gov­er­nor Dan Evans tried twice to amend the state Con­sti­tu­tion in the 1970s to explic­it­ly give the state the author­i­ty to levy an income tax, but vot­ers would­n’t go along.

Since Evans’ time, no gov­er­nor or Leg­is­la­ture has made a seri­ous attempt to over­haul the state’s upside down tax code. Hav­ing not seen any evi­dence that law­mak­ers are capa­ble of work­ing togeth­er to address the mat­ter, vot­ers across the state have respond­ed skep­ti­cal­ly when asked if they’d sup­port an income tax.

A Novem­ber 2010 ini­tia­tive to levy an income tax on high earn­ers, spear­head­ed by Bill Gates Sr., gar­nered less than 40% of the vote.

Research indi­cates there is plen­ty of sup­port among the statewide elec­torate for an incre­men­tal tax reform approach empha­siz­ing small­er steps, like:

  • levy­ing a cap­i­tal gains excise tax
  • clos­ing tax breaks that are no longer in the pub­lic inter­est
  • requir­ing cor­po­ra­tions to repay tax breaks and sub­si­dies they pre­vi­ous­ly received if they fail to deliv­er on their job cre­ation promis­es
  • enact­ing a home­stead exemp­tion to make prop­er­ty tax­es fair­er
  • repeal­ing the loop­hole-rid­den busi­ness and occu­pa­tion tax on gross receipts and replac­ing it with a fair­er solu­tion

Were law­mak­ers to start imple­ment­ing these ideas, it would increase pub­lic trust in gov­ern­ment. More vot­ers would become open to the idea of an income tax.

In Seat­tle, though, the enthu­si­asm already exists, even with­out leg­isla­tive action. Seat­tleites are on record as being in strong sup­port of an income tax. Numer­ous polls have found robust majori­ties in sup­port of levy­ing one, and Seat­tleites vot­ed over­whelm­ing­ly to pass Ini­tia­tive 1098 in 2010, as was point­ed out by the staff run­ning the city coun­cil’s Twit­ter account this after­noon.

Susan Hutchi­son and the state Repub­li­can Par­ty are throw­ing a huge fit, call­ing the city’s ordi­nance uncon­sti­tu­tion­al and ille­gal. That’s amus­ing, con­sid­er­ing all of the uncon­sti­tu­tion­al Tim Eyman ini­tia­tives they’ve enthu­si­as­ti­cal­ly endorsed over the years. The par­ty knew Eyman’s I‑1366 was bla­tant­ly uncon­sti­tu­tion­al when it appeared on the 2015 bal­lot; they urged peo­ple to vote for it any­way.

It remains to be seen if the Seat­tle City Coun­cil’s action today will mean­ing­ful­ly advance the cause of pro­gres­sive tax reform statewide. This ordi­nance may not yield a rul­ing over­turn­ing the hold­ing of that bad­ly rea­soned Supreme Court deci­sion from the 1930s. The Court could just rule that cities don’t have the author­i­ty to levy this kind of tax. They may choose not to reach the under­ly­ing issue. We’ll see.

But if noth­ing else, it’s nice to know that at least at the local lev­el, we have elect­ed rep­re­sen­ta­tives who are will­ing to be bold and cre­ative in an effort to cat­alyze change. That’s what is need­ed in dif­fi­cult, uncer­tain times such as these.

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