Have you heard what is happening in Seattle? The Seattle City Council plans to impose a local income tax by July 10. Why should you care? Because unlike Las Vegas, what happens in Seattle rarely stays in Seattle. This is especially true concerning the plan to impose a city income tax.
First things first, Seattle’s income tax proposal is blatantly illegal and unconstitutional. Just ask former state Supreme Court Chief Justice Gerry Alexander and former state Attorney General Rob McKenna, who wrote in The Seattle Times (May 26): “The Legislature cannot impose a progressive or other nonuniform tax on income, either directly or indirectly. Now, Seattle City Council wants to pass an illegal income tax ... by midsummer. This proposed measure ultimately will fail.”
The state constitution says that property must be taxed at a uniform rate, and the state Supreme Court has ruled repeatedly that income is property. In addition, state voters have five times rejected constitutional amendments to impose a graduated income tax, and four times they have rejected proposals to call an income tax an “excise tax.”
Despite facts like this, Seattle City Council member Lisa Herbold said during a recent TV debate that it wasn’t clear a local income tax was illegal. Perhaps she isn’t familiar with the 1951 ruling from the state Supreme Court invalidating an income tax, saying “It is no longer subject to question in this court that income is property.”
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Instead of pursing a clearly illegal city income tax proposal, the Seattle City Council should follow the lead of the Olympia City Council. Elected officials there fought a local income tax proposed by Seattle activists in 2016. Last July the Olympia City Council filed an injunction to keep Measure 1 off the ballot as an illegal income tax proposal.
But why does it matter if Seattle’s proposed income tax somehow is found legal? 1) The only way Seattle can have a city income tax is for one to be allowed across the state; and 2) Though always sold as a targeted tax on the rich, income tax rates inevitably grow over time.
Don’t believe me? When enacted in 1913, the U.S. income tax ranged from 1 percent to 7 percent. Today the tax rates range from 10 percent to 39.6 percent (the top rate at one point reached as high as 94 percent). Similar income tax rate creep has happened in states across the country.
In case you need a little more proof, let’s look at the last state to be seduced by the income tax salesman. In 1991 Connecticut lawmakers decided to take the income tax plunge. How is that working for them?
According to The Wall Street Journal (May 19): “The wealthiest state in the U.S. is having trouble collecting enough money to pay its bills, and the Democratic governor doesn’t think taxing the rich is the answer anymore ... Gov. Dannel Malloy has twice before bet that taxing the wealthy would help solve the state’s fiscal problems. But neither increase resulted in sustained revenue growth, according to his administration, which says it would be a mistake to do it a third time.”
Closer to home, officials at the state Department of Commerce say on their Choose Washington business recruitment site: “We offer businesses some competitive advantages found in few other states. This includes no personal or corporate income tax.”
Does it really matter if we give up the state’s non-income tax advantage? Yes, according to former Microsoft CEO Steve Ballmer, as reported by the Puget Sound Business Journal (May 25): “Washington’s lack of an income tax is one of the state’s main recruiting advantages over California. Enacting an income tax in Seattle, Ballmer said, would lead to fewer jobs.”
There are new bills in the Legislature to try to stamp out this growing attempt by some local officials to nullify the state’s constitutional and statutory protections against a graduated income tax. With not much else happening during the special session, lawmakers should act on these proposals.
Should Seattle or any other city wish to enact an income tax, it should focus its efforts on engaging the people and its delegation to propose this new authority in the Legislature instead of passing illegal local ordinances to set up lawsuits. Since state voters have already rejected five income tax constitutional amendments, Seattle is trying instead to pass an illegal income tax in hopes the state Supreme Court will do a 180 on 84 years of case law.
One thing is certain — if our state via Seattle manages to open the door to an income tax, we will constantly be hearing from the tax collectors as the income tax expands and rates creep up and up.
Jason Mercier is the government reform director for Washington Policy Center, a nonprofit, nonpartisan research organization with offices in Tri-Cities, Spokane, Seattle and Olympia. Online at washingtonpolicy.org