‘I have no illusions the bill will pass’: Why state lawmaker is leading latest push for income tax

Not every bill proposed in the state Legislature is expected to pass, and for some lawmakers, merely inspiring a discussion is more than worth it regardless. That’s the motivation for state Sen. Bob Hasegawa, who’s sponsoring a proposal to allow cities to impose a graduated income tax.

Diving into Seattle’s case for an income tax

Washington’s battle over an income tax dates back to the 1890s, when the government saw fit to tax property rather than income due to an overwhelmingly rural population of farmers. As property values began to decline circa the Great Depression, farmers began to instead push for an income tax as a more equitable way of raising money.

That saw the state Legislature pass an income tax in 1931, before ending up in the courts. They ultimately ruled that it violated the Washington State Constitution, which mandated that property taxes needed to be applied uniformly, and that income should be treated like property.

That legal precedent has held up to this day, with attempts to enact an income tax failing to pass legal muster on numerous occasions. But then, in 2019, a shocking ruling from the Washington State Supreme Court cracked open the door, ruling that while the City of Seattle’s attempt to establish a 2.25% tax on incomes over $250,000 was unconstitutional, the city could still levy an income tax, provided it was uniform across all tax brackets.

The latest push for an income tax

Sen. Hasegawa believes that ruling may have opened the floodgates, particularly if the court ever decides to fully roll back its 1930s decision related to income being treated as property.

“The [2020] Supreme Court decision that overturned the initiative back in the 1930s was based on the construct that income is property,” Hasegawa told MyNorthwest. “That’s no longer true — that entire decision should be reversed.”

“I think that if it went back to Supreme Court, the Supreme Court could very well decide that it is constitutional,” he added.

That would still require a heavy legislative lift, though, and Hasegawa admits that he “has no illusions that the bill’s going to pass.” In fact, he doesn’t even expect it to get a vote in front of the state Senate, much less a committee hearing (which, to his surprise, it did get on Thursday).

The larger goal, he says, is “to get people thinking about possibilities.”

“People are so afraid to have conversations that they think may be politically volatile,” he noted. “But in my mind, there’s no question that this is in the best interest of the state of Washington, and the vast majority of the people in this state — it’s a conversation we have to have about tax reform.”

In practice, Sen. Hasegawa’s bill would allow cities to impose a graduated income tax as long as they also lower local property, use, public utility, and/or sales taxes in kind. The goal is to ensure that the average middle- or low-income taxpayer ends with less, not more, of a financial burden.

Capital gains tax ‘not necessarily’ the first step toward income tax

“This bill implements a process where if progressive revenue is increased through the graduated income tax, regressive taxes are decreased in an equivalent amount,” he described. “So it’s not a net revenue gain per se, it’s just where you get that revenue from.”

He envisions “the top 1% paying the most,” as a means to balance a state tax code often criticized as among the most regressive in the nation.

Despite the fact that an income tax has also traditionally been a tough sell to Washington voters, Hasegawa still believes that “at worst, you should get a wash” should his proposal be implemented, and “at best, net taxes could go down if the wealthy are paying their share.”

As for the way things are currently: “It’s just an upside down system, and totally hurting everybody from no income to low-income and middle-income people,” he said.

“We’re all paying more than our fair share.”

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