Income tax a big dividing line in WA, but Seattle’s case is going nowhere

One of the clearest dividing lines in Washington state politics is our lack of a state income tax. Many on the left view an income tax as the path to a fairer tax system. To most everyone on the right, it looks like just one more way to let government chip away at your paycheck.

It’s a dividing line among politicos, anyway. Among the public at large, there’s more agreement – they don’t want one. During the height of the Depression in 1932, voters approved an income tax initiative. But in nine subsequent votes, they’ve rejected the idea each time.

The latest attempt was in 2010, when advocates put I-1098 on the ballot. Despite being told the tax would only apply to the wealthy, a decisive 64.15% of voters turned it down.

With that kind of majority, clearly plenty of Democratic voters, too, doubt that our state needs an income tax.

So what is Seattle’s income tax about?
Activists on the left not only want an income tax, they want one with graduated rates, like the federal income tax. To achieve that, first they need the state Supreme Court to overturn decades of precedent.

That’s because the court in the 1930’s ruled that a person’s income is their property. Under our state constitution, property must be taxed uniformly. The court ruling, which was upheld in subsequent cases, effectively bars graduated rates.

Seattle’s new local income tax is all about setting up a test case. Some activists are convinced today’s state Supreme Court justices are anxious to overturn precedent and clear the way for a state income tax, with graduated rates. A group calling itself Trump-Proof Seattle (because Donald Trump has so much to do with our state and local tax structure) wrote a few months ago:

“We expect that today’s progressive State Supreme Court will reverse those rulings, based on legal developments in Washington and other states since the 1930s. But in order for them to do this, first a measure needs to be passed and challenged!”

The movement to pass an income tax – any kind of income tax, anywhere in the state – and set up a test case shifted its attention to Seattle, after Olympia voters rejected a city income tax there last year. I-1098 in 2010 was also an attempt to set up a lawsuit, but it would have created, had it passed, a much cleaner challenge than Seattle’s local effort.

What are the chances Seattle’s income tax case succeeds?
A case based on Seattle’s new tax faces an additional barrier. State law is clear that cities and counties aren’t allowed to enact local income taxes. Playing word games – like calling it an “excise” tax – won’t get Seattle past the prohibition.

Since courts rule on statutory matters first, that’s where Seattle’s income tax case is likely to end. The courts shouldn’t rule on the constitutionality of a graduated income tax unless the Seattle case somehow gets past the ban on local income taxes.

Even the Seattle elected officials who passed the income tax aren’t predicting success in the courts. Council president Bruce Harrell told the Seattle Channel recently that “it is probably time to test the law” to at least “send a signal to the judicial body” that cities want income taxes, but he didn’t predict success. Councilmember Sally Bagshaw likewise demurred on the city’s chances in court.

Despite the odds, they’re willing to spend taxpayer funds on the case. Some might call that a waste. In Seattle, it’s “sending a signal.”
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.