MYNORTHWEST NEWS

Two perspectives on the controversial Seattle income tax

Jan 16, 2018, 8:36 AM | Updated: 9:30 am

Supporters of the controversial Seattle income tax are convinced it will survive. Those in opposition to the tax are confident it will fail. At a recent King County Council Regional Policy Committee meeting, King County leaders heard arguments on both sides.

John Burbank, executive director for the Economic Opportunity Institute, and Jason Mercier, Director of the Washington Policy Institute, discussed the issue and answered the committee’s questions during the meeting.

“Mr. Burbank and I are both optimistic,” Mercier said. “He is optimistic that his provision will prevail and I am optimistic that the state Supreme Court will do the same thing that it has for the last 90 years (knock it down).”

RELATED: Seattle paid $50,000 to outside groups preparing its income tax

The Seattle income tax has already run afoul of state law in King County court. But proponents are aiming the case at the state Supreme Court where they believe the court will change its legal interpretation.

Pro-Seattle income tax

John Burbank and the Economic Opportunity Institute do more than just support the income tax. In fact, the organization is largely behind crafting it for Seattle leaders. Burbank argues that the state’s system of taxation is lopsided and unfair.

“The most telling indicator is that if you are in the top 1 percent, you’ve already met your state and local tax obligation for the whole year as of today,” he said. “If you are in the bottom 20 percent, you will be working into March to meet your state and local tax obligations.”

Burbank said that the income tax problem began in 1932 when Washington residents voted 70.2 percent in favor of a progressive tax, but the state Supreme Court invalidated that decision in 1933. The court ruled 5-4 that income was property, therefore subjecting it to strict rules. Washington could impose an income tax now, but it would be a uniform 1 percent. Seattle, however, wants to set a different rate for different income levels.

“It’s time that we dismantled a century-old discriminatory tax system that weighs heavily on low-income and working-class residents and particularly people of color while enabling the affluent to skip out on significant contributions to public services,” Burbank said. “That is what we hope the legal findings of the state Supreme Court will enable.”

Anti-Seattle income tax

Opposite Burbank is Jason Mercier, the director of the Washington Policy Institute. Mercier notes that since the court decision in the 1930s, there have been six constitutional amendments to allow graduated income taxes — all have been rejected. There have also been four separate ballot measures to get around the law with an excise tax — they were also rejected.

“There have been 10 straight votes rejecting a statewide income tax,” Mercier said. “What’s a little bit new to this now is what is occurring at the local level. We also had an effort similar to Seattle’s in Olympia a few years ago. Just like with Seattle that did go to court … it was allowed to go to a vote and voters still rejected that measure.”

Despite residents’ rejection of this form of taxation, Mercier says that the city is attempting to go around them via the courts. He argues that changes to taxation should be done through elected representatives in the Legislature, not by judges.

Two questions about the Seattle income tax

Algona Mayor Dave Hill wanted clarification on who will pay the tax, which is a 2.25 percent tax on single people earning more than $250,000 and couples earning more than $500,000. But what if they work in Seattle and do not live in the city?

In short, if you don’t live in Seattle at least half of the year, you are not subject to the tax.

“Let’s say you work at Amazon and you live on Bainbridge Island — you are not paying this tax,” Burbank said.

“That would actually bring up a question: Would this actually encourage people to move to your town?” he added. “It’s a funny thing because 2.25 percent above $500,000 is not really a lot of money. Especially when you consider moving costs, closing costs, selling one house, buying another house, and then sitting in traffic for an hour or two hours a day versus living in Seattle.”

A second question was posed by King County Councilmember Jeanne Kohl-Welles, who said she was very disturbed by Washington’s regressive tax system; that the top-earning residents can easily pay off their tax burden within days, while the rest take months. Despite the two men having differing opinions on the issue, how can this be remedied?

“I have understood that we have the most regressive tax system in this country, do you believe that is accurate?” Kohl-Welles asked.

“I would say that according to the information from the Institute for Taxation and Economic Policy, we do have the most regressive tax system in the country,” Burbank said. “And the Legislature made it even more regressive with their passage of an increase in the property tax to fund K-12 education.”

Mercier had two recommendations.

“The first one is to stop making it worse,” he said. “Don’t exacerbate the problem by passing new excise taxes that have disproportionate impacts; the soda taxes and things of that nature. The second thing is rather than inject new forms of taxation that are high in volatility, target your relief. We’ve seen this with an act in Olympia with the working family rebate.”

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Two perspectives on the controversial Seattle income tax