The first lawsuit over Seattle’s new income tax on high earners has been filed. The city is being sued by Michael Kunath in King County Superior Court.
He and his attorney didn’t immediately respond to interview requests, but according to court filings, Kunath argues that Seattle’s new income tax on high earners violates the state constitution. That’s because the constitution says cities cannot impose a net income tax.
Former chief justice of the State Supreme Court Gerry Alexander thinks the city faces an uphill battle.
“Cities only have taxing authority that’s given to them by the state Legislature, and cities have not been authorized to impose an income tax,” Alexander explained. “In fact, there’s a statute that says they can’t impose a net income tax.”
He said Seattle’s proposal could be challenged on both of those issues.
Alexander said if those statutes don’t stop the income tax in the courts, there’s another problem: The state constitution says property has to be taxed at the same rate, and income is considered property in Washington. Alexander said that would prohibit a tax on some people’s income but not others’.
Another former state Supreme Court justice, Phil Talmadge tells KING 5 that the trip through the courts could be lengthy.
“Back in the 1930s, the people adopted a straight forward, graduated net income tax by initiative, and the court said ‘No; income is property.”…
“Those decisions were very clear cut and basically the court reaffirmed that position in the late 1990s, 2000 period,” said Talmadge, who sat on the Supreme Court when the issue was most recently revisited in a case involving Mukilteo.
“In fact, I dissented in that case; I thought those older cases that should no longer be viable. Whether the present Supreme Court agrees or disagrees with that, we’ll wait and see when they issue their opinion.”
…Talmadge believes the court case could take two to three years; supporters of the ordinance believe it will take less time than that if expedited.
This week a new group opposing the tax announced its formation. Geek Wire reports,
Matt McIlwain, managing director of Madrona Venture Group, has founded a non-profit to fund legal challenges to Seattle’s new income tax on high earners. McIlwain confirmed his involvement in an interview with Fox Business Monday.
The group, called the Opportunity for All Coalition, claims Seattle’s newly-passed tax is “illegal” and “unnecessary.”
The Puget Sound Business Journal reports McIlwain is receiving legal advice from former state Attorney General Rob McKenna.