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What controversial income tax decision means for Washington

Jul 18, 2019, 1:39 PM
Income tax, Washington state...
A controversial decision from an appeals court could blaze a trail for an income tax in Washington. (Photo by Chris Hondros/Getty Images)
(Photo by Chris Hondros/Getty Images)

After an appeals court ruled that Seattle could legally impose an income tax if certain conditions were met, many have wondered what comes next. Supporters of the measure touted the decision as groundbreaking. Others still remain skeptical.

“Nothing’s changed,” former Washington State Attorney General Rob McKenna told KIRO Radio’s Dave Ross.

For activists, the goal is to eventually get the case before the Supreme Court, with the end goal of getting a full, graduated income tax approved. McKenna, though, doesn’t see that happening.

“This is not to say we couldn’t have an income tax which is graduated, but we have to amend the Constitution to do it,” he pointed out. “That’s been tried half a dozen times unsuccessfully because the voters don’t want it. And the voters have voted against an income tax overall 10 times.”

Court rules Seattle can impose an income tax in stunning decision

For the time being, the appeals court ruling still carries significant weight, even without approving a graduated income tax on high earners.

The appeals court ruled that while the tax levied against high earners by the City of Seattle is unconstitutional, the city still has the authority to impose the tax, provided it’s uniform across all tax brackets. Essentially, if Seattle — or any city in Washington — wants an income tax, it would need to be applied evenly across every household, regardless of what they make yearly.

The basis of the ruling was essentially that income is equal to property, and by state law, property can be taxed at a rate up to 1 percent.

“The court decision says Seattle’s entitled to tax property; that income is property; wealth is also property,” Ross posited. “So, couldn’t Seattle conceivably pass a 1 percent tax on everything, including everybody’s wealth? Since presumably rich people have more wealth than middle class people, that would serve the same purpose as the graduated income tax, which they are not allowed to impose.”

As Republican State Sen. Steve O’Ban noted, it’s a troubling development for opponents of an income tax in Washington.

Seattle City Council knew income tax was illegal before passing tax

“There are two legal barriers to an income tax in our state. The court of appeals took a sledgehammer to one of those barriers,” O’Ban told KIRO Radio’s Dori Monson. “The only remaining barrier now is a 1930s-era court decision, which the court said our state Constitution prohibits a graduated income tax.”

That second barrier will likely be tested in front of the Washington State Supreme Court sometime in the near future.

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What controversial income tax decision means for Washington