MYNORTHWEST NEWS

What people outside Seattle should know about income tax lawsuits

Aug 10, 2017, 7:58 AM | Updated: 4:37 pm

income tax...

(Alan Cleaver, Flickr)

If the challenges against Seattle’s income tax fail, people living outside of the city need to understand that it could open the flood gates for state lawmakers and other jurisdictions.

RELATED: Attorney expresses concerns over Seattle income tax lawsuits

Former state Attorney General Rob McKenna, who is behind one of three lawsuits, told Seattle’s Morning News that it could lead to a statewide income tax and/or other city income taxes.

“People who don’t live in Seattle need to understand this is a test case…” he said.

Additionally, McKenna warns that the law in Seattle could change and extend to “far more people” if the city decided to do so.

Two new lawsuits opposing the income tax were filed this week. McKenna and former state Supreme Court justices are involved in one of those. The other is being led by the Freedom Foundation.

The first lawsuit was filed last month.

All three lawsuits say the city’s plan to levy a 2.25 percent tax on individual incomes of more than $250,000, or combined incomes of more than $500,000, at the beginning of next year is against state law. The tax would apply to the money earned above the set limits.

The Seattle City Council unanimously approved the income tax in July. Seattle Mayor Ed Murray quietly signed the tax into law days later.

Supporters of a city-wide income tax argue that the state’s tax system is unfair.

“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’s income tax in court

The Legislature, however, is where the income tax battle should properly be waged, according to some critics.

“If you are going to do this, do it at the state level only, and do it with appropriate and significant reductions in these other (sales and property) taxes,” Attorney Phil Talmadge told KIRO Radio’s Dori Monson.

Talmadge is a former state Supreme Court justice and Democratic state senator. He currently represents parties suing Seattle over its income tax.

“The bottom line is that we have a number of arrows in our quiver that are pretty strong and potent arguments to defeat this proposal,” Talmadge said. “And mind you, I’m somebody who historically voted for an income tax when I was in the Legislature.”

But Talmadge says Seattle’s tactics are the wrong way to get an income tax, and it also is poorly designed.

“That’s one of the things that’s offensive about this proposal; it isn’t just a tax on the rich,” he said. “That’s something that is really a misnomer sold by proponents on the measure. For example, if you are a business owner and you are a partnership or an S corporation where the money passes through, you are taxed an all the gross income of the business, not what goes into your pocket. That will kick a lot of people above the dollar limit the ordinance sets. Also, if you sell a house tomorrow with this super-heated housing market we have, more than $250,000 on that sale, guess what, that’s income. You are going to pay taxes on that sale.”

MyNorthwest News

This NOAA satellite image shows the magnitude of the storm moving inland from the Pacific Ocean. (P...

Ted Buehner, KIRO Newsradio Meteorologist

What to expect as Western Washington’s first big fall storm arrives Saturday night

The fall season’s first strong weather system will sweep through Western Washington tonight, bringing strong winds and rain.

9 hours ago

Pierce County man sentenced child sex crimes...

Regan Gallo-Fenz

Pierce County man sentenced to 15 years in federal prison for child sex crimes

A Pierce County man has been sentenced to 15 years in federal prison after attempting to arrange the sexual abuse of children and producing child sexual abuse material, federal prosecutors announced.

18 hours ago

home listings...

Frank Lenzi

Home listings jump more than 25%: Is it a buyer’s market?

If you’re thinking about buying a house, now might be a good time: Home listings have risen, and pending sales have declined.

1 day ago

Grays Harbor...

KIRO 7 News Staff

Grays Harbor deputies seek information about deadly hit-and-run near Satsop

The Grays Harbor County Sheriff’s Office is asking for the public’s help after a 53-year-old man was found dead along a road near Satsop last week.

1 day ago

first responders...

Luke Duecy

Renton firefighter shot while responding to call highlights dangers facing first responders

A Renton firefighter was shot. The shooting is another example of the dangers first responders face while trying to help people in crisis.

1 day ago

Macklemore (3)...

Julia Dallas

Macklemore says Climate Pledge Arena among venues that rejected his ‘Free Palestine Tour’

Macklemore said several venues, including Climate Pledge Arena, have rejected his efforts to bring his “Free Palestine Tour” to the U.S.

1 day ago

What people outside Seattle should know about income tax lawsuits