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Seattle income tax passes with unanimous council approval

The audience erupted in applause when the Seattle City Council passed an income tax, July 10, 2017. (Seattle Channel)

The city council unanimously passed a Seattle income tax Monday, positioning the city for a legal battle.

“Washington state’s tax system is unfair and is not just,” Councilmember Tim Burgess said shortly before the council voted 9-0 to pass the income tax and the council chambers erupted with applause.

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“That is my core motivation for supporting this legislation today,” he said. “State tax reform is needed here in Washington state so our lowest income residents pay less, our middle class neighbors pays about the same, and our highest income residents pay more. That would be a just system.”

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The 2.25 percent Seattle income tax would apply to earnings after Jan. 1, 2018. Seattle residents who make more than $250,000, or $500,000 for joint filers, will have a tax free income of that amount. After that, they will be taxed at the 2.25 percent rate.

The summary of the ordinance states what the revenue will be used for:

The estimated $140 million in new yearly revenue that would be generated by this tax could be used to: lower the burden associated with property taxes and other regressive taxes; address the homelessness crisis; provide affordable housing, education, and transit services; replace funding that could be lost through federal budget cuts, including funding for mental health and public health services; and create green jobs and meet carbon reduction goals. Tax proceeds would also be used to pay the cost of tax administration and collection.

The 2.25 percent rate is higher than the 1.5-2 percent rate that was previously promoted at town hall meetings. Those meetings were designed to garner support for the Seattle income tax. The council reaffirmed its argument for the tax before passing it — that the top 1 percent of the state pays only 2.4 percent of its income in taxes, while the poorest 20 percent pay 17 percent of their income.

“Clearly we need a statewide income tax, but our Legislature isn’t going to do that,” Councilmember Sally Bagshaw said. “… other cities are going to follow this lead. I have heard a number of people say that people will just move out of the City of Seattle; the wealthy are going to move. You know that’s not true … and if we get past the constitutional muster, other cities are going to jump on this.”

Seattle income tax goes to court

While the council has officially passed an income tax, the journey to implementing it is far from over. Passing the ordinance was merely the first step. The city’s strategy is to press the issue in court. Progressive income taxes are currently illegal according to the state constitution, but if Seattle succeeds it will knock down that understanding of the law.

“This is big step forward in Seattle, but hopefully it is also a big step forward for our state,” Councilmember Lisa Herbold said.

The issue has been ruled on twice at the state Supreme Court level — the first ruling in the 1930s. But things could be different this time around.

“Proponents are counting on the political makeup of our state Supreme Court, which happens to be very liberal at this moment, to win this lawsuit and get this tax through,” said Paul Guppy with the Washington Policy Center, a free market think tank.

“The city council is teaching us today that it is OK to evade the law if you feel it works to your advantage,” he told The Dori Monson Show. “That’s basically the civic lesson they are pushing.”

Guppy said he doesn’t ultimately know how the Supreme Court will rule. But he doesn’t expect a big fight. He points to the charter school issue as an example; an issue divided along political lines. The Supreme Court ruled that the recently-approved charter schools were unconstitutional. People like Guppy disagreed. So did the Legislature which quickly passed a law to get around the ruling.

“That experience shows that there is no predicting the way these judges might rule and they are very strongly driven by ideology,” Guppy said. “You think that a sentence in the law is very clear, that says a city cannot create an income tax. I’ve read it. It’s obvious. You don’t have to be a lawyer to understand it. But I would not put it past our current Supreme Court to come up with a twisted understanding and allow (the income tax) to go through.”

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