Seattle income tax may not make it to Supreme Court

A ruling by a King County court judge last week against the City of Seattle’s income tax may have been expected, but that doesn’t mean it’s not a setback.

RELATED: Seattle’s tax loses in King County court

Jason Mercier, the Director of the Center for Government Reform at the Washington Policy Center, spoke with KIRO Radio’s Dori Monson to weigh in on Judge John Ruhl’s decision.

“When you consider state law and prior court precedent, the ruling did not come as a surprise,” Mercier said.

Seattle’s goal from the beginning has been to take the tax all the way up to the state Supreme Court. Nonetheless, Mercier called the court decision “devastating” for the city.

“Because it’s prohibited by state law, [Judge Ruhl] didn’t even address the constitutional issues that Seattle was trying to raise to see if it could get the Supreme Court to try to overturn 80 years of case law,” he said. “There’s a slight chance that it might not get to the Supreme Court.”

If the city appeals the decision as many expect it to, Mercier said, the Appeals Court could rule unanimously to uphold Judge Ruhl’s original ruling. In that case, it is possible that the state Supreme Court would let the Appeals Court decision stand.

Mercier does not disagree with the idea that the Constitution is a living document, one that can be changed as society changes.

“The voters are supposed to do that,” he said.

But not the courts, he argues, and Seattle voters have not been willing to approve constitutional amendments relating to an income tax in the past.

In the last century, Seattleites have voted 11 times on the issue of an income tax, and have nearly always chosen against it. Most recently, voters rejected initiative 1098 in 2010. The last time an income tax initiative was approved was in 1932. That measure was later thrown out by Washington’s Supreme Court in 1933.

“We consistently reject proposed constitutional amendments to allow a graduated income tax,” Mercier said.

If Seattle is able to pass the income tax, some fear that other cities across the state will follow.

“That’s not a speculative concern,” Mercier said. “This is all about bringing an income tax to every city in the state.”

One of the city’s arguments for the income tax is that it isn’t actually an income tax, but an excise tax. Another argument is that it is simply a tax on the privilege of living in Seattle.

“If you don’t like that you can move to Bellevue,” Mercier explained.

Mercier also discussed how the income tax ruling might affect the possibility of a future state capital gains tax. A capital gains tax, something that was initially included in Governor Inslee’s proposed budget for 2017-2019, is a tax on profit gained from the sale of a property or an investment.

“Even though we have heard Governor Inslee say that he does not support an income tax, and even though we have heard many in the Legislature say they do not support an income tax, they say, ‘Well, we do want a capital gains tax,’” Mercier said. “It’s the same thing.”

“The fact that you are required to report your income tax to the state should be a pretty clear indication on what type of tax it is.”

The continuing litigation relating to the income tax will cost the city money, Mercier said. “Not counting their in-staff attorneys, they have an outside contract with outside counsel for $250,000.”