WA Supreme Court to reevaluate Seattle’s income tax proposal

After Seattle’s proposal to impose a city-wide income tax was rejected by the King County Superior Court, the city asked the Washington State Supreme Court to reevaluate the case. Now the Association of Washington Cities, which is a group that represents all of Washington’s 281 municipalities, has joined the cities of Olympia, Port Angeles and Port Townsend in issuing an amicus brief stating that they believe the Seattle City Council does not need specific legislative permission to impose an income tax on Seattle residents. The AWC brief’s main argument is that the law RCW 35A.11.020 gives “home rule” powers which would mean that cities can issue their own taxes in the course of managing their own affairs.

AWC’s brief addresses the recent ruling and claims that Seattle has a right to impose such a tax. The CEO of the AWC, Peter King did issue a clarification “AWC has not taken a position in support of local income taxes.” King further elaborated to explain that AWC believes that locally elected officials have the greatest understanding of local needs and should have the authority to make local decisions, and that the implications of denying this tax would have widespread negative effects on local politics throughout the state.

The vote was unanimous from the Seattle City Council when imposing a 2.25% tax on total income above for $250k individuals and $500k for married couples, with a plan to use the estimated $140 million annual revenue “for housing, education and transit and to lower other, regressive taxes.” Which taxes will be lowered was not immediately clear but a bevy of lawsuits were issued in response to the decision, and the income tax headed to court where it was struck down before any residents were charged.

Washington has a state law that specifically bans taxes on net income. RCW 36.65.030 states “Tax on net income prohibited. A county, city, or city-county shall not levy a tax on net income.” This law was not mentioned in AWC’s brief and this seemed to be a major factor behind the May 22, 2017 ruling in King County Superior Court. Watchdog staff asked AWC why this issue was not mentioned and were informed that the AWC does not currently have an “answer to that particular question.”

This is not Washington’s first time talking about an income tax. It is one of only seven remaining states that does not charge its residents a state level income tax. This is not for lack of trying by politicians but rather a continuous show of voter opinion. Over the years, Washington voters have voted no on income taxes in 1934, 1936, 1938, 1942, 1944, 1970, 1975, 1973, 1982 and again in 2010. If the state supreme court rules that Seattle can impose a tax, with the blessing of the AWC, local income taxes in the state of Washington will be come a reality even though voters never approved them.

The Supreme Court is expected to accept the case and involved parties anticipate official confirmation before the end of 2018 and a decision sometime during 2019. This case is something to keep a close eye on as it has the potential to set a new precedent as Seattle pushes for more local taxes on the heels of the recent head tax fiasco.