It’s about time Seattle got a reality check. For too long, the city’s leaders have acted as if they were above the law. This week, a court ruled the income tax on the city’s wealthiest citizens that the city council passed in July was against the state legislation, and therefore illegal.
“There is no merit to any of the arguments they’re making,” said attorney Matthew Davis. “There is a statute that says, ‘thou shalt not do this’ and the city council said ‘we’re going to do it anyway.'”
Lawyers representing the city said the income tax is more of an excise fee for the “privilege of working or living in Seattle.” Paul Lawrence, representing the city, said: “People in Seattle are obtaining significant benefits from residing here. This is what the city is trying to tax.”
“To the extent that the Ordinance purports to impose a tax on the ‘privilege’ of receiving pay for labor, such a ‘privilege’ is not a valid basis for an excise tax,” King County Superior Court Judge John Ruhl wrote in a 27-page ruling. “In short, the city’s tax, which is labeled, ‘Income Tax,’ is exactly that. It cannot be restyled as an ‘excise tax’ on the alternate ‘privileges’ of receiving revenue in Seattle or choosing to live in Seattle.”
According to a 1930s Supreme Court ruling regarding state income tax, Washington state law explicitly states that cities and counties “cannot impose income taxes.” The councilmembers, however, are adamant that a tax needs to be placed on those earning $250,000 or more in total income per year. The .25% tax would be harnessed for several uses, including replacing monies lost from federal funding. Since Seattle is a sanctuary city and adamantly refuses to give in to the president’s travel ban, they risk losing federal grants and funding. This “excise” was just another way to help cope with the loss.
Those in favor of the increase say the state’s taxes are too regressive and need to move forward and be more progressive, lest they risk making Seattle a city of only the wealthy. Whether or not the proposition holds any real merit, the issue is how the council members went about passing it – as if they were a law unto themselves.
An appeal is planned, and the city is hopeful the 1930s ruling will be revised to reflect a more progressive agenda. Officials will argue on the grounds that the proposed tax is on total income earned while the state law says a tax cannot be placed on personal net income. However, Judge Ruhl noted that net income is part of total income, and therefore untaxable by the city.
Whether the appeal is a success, the hope here is that the city council learns a few lessons – one being they cannot just do as they please without being held accountable to the same laws followed by the rest of the state.