More on surprising state appeals court ruling on Seattle income tax

Monday’s appeals court ruling upended expectations. Sure, the fining that a graduated income tax violates the constitution was unsurprising. But few players thought the court would knock down the statutory prohibition and find that cities could impose an income tax. What it means is anybody’s guess. And there’s a lot of guessing going on.

Seattle Times columnist Danny Westneat writes that the decision means that an income tax is finally in sight. The decision, he writes, 

…was actually what the city was hoping for. The judges not only said it was OK for cities to levy income taxes as long as they charge everyone the same rates. But more importantly, they all but invited the state Supreme Court to revisit the 84-year-old precedent case that bars graduated, different rates — a ruling that has stymied progressive dreams for decades.

Read the column to follow the argument. Jason Mercier, the Washington Policy Center analyst who has been following the income tax debate closely, wrote Monday,

By striking the statutory prohibitions, the Appeals Court greatly increases the odds the state Supreme Court will take the case providing income tax proponents the opportunity to remove the graduated constitutional prohibition without a vote of the people. Washingtonians have already rejected six proposed constitutional amendments to allow a graduated income tax. In fact, 10 straight income tax ballot measures have been rejected.  

Responding to the ruling Matt McIlwain (one of the plaintiffs) said:

“We are concerned about these findings by the Court of Appeals for many reasons from opening a Pandora’s Box of income tax prospects at a city, county and state level in Washington State to reinterpreting the ‘single subject’ rule on state legislation.”

Mercier notes one consequence of the decision.

With final resolution of this case unlikely to occur this year, all eyes will now turn to Spokane. What originally looked like a proposal of double insurance could now stand as the first line of defense against a local income tax in Spokane. Spokane Initiative No. 2019-2 (Charter Amendment Prohibiting a City of Spokane Income Tax) has qualified for the November ballot. If successful, this effort will prohibit Spokane from being able to impose an income tax without a vote of the people regardless of any changes to the state law concerning a local income tax. 

The Walla Walla Union-Bulletin editorial board believes local income taxes skirt the constitution. They make several convincing arguments, including one that strikes us as obvious:

The state constitution is clear that the state can’t impose an income tax. Implied in that is that such a tax can’t be enacted within the state by local governments, either counties or cities. The Legislature imposed the ban in 1984 to ensure there is no misunderstanding on the legality of an income tax at any level.

While the Court of Appeals might well be correct that the 1984 law was imposed correctly, it is nevertheless clear that the Legislature intended to ban city-imposed income tax.

The Economic Opportunity Institute, a primary backer of the Seattle income tax, is elated. That’s their word, not ours. And their blog post leaves little doubt that other cities are watching this closely. 

The Economic Opportunity Institute helped write this income tax on the affluent and is defending it in this lawsuit alongside the City of Seattle. The cities of Olympia, Port Townsend and Port Angeles, as well as the Association of Washington Cities and other parties have also submitted amicus briefs in favor of the tax.

We at EOI are elated. On a scale of 1 to 10, where 10 is the best ruling possible, this is a 9. Having clarified Seattle’s authority to tax income, and cleared away the underlying impediments, we are ready to appeal this decision to the Washington State Supreme Court…

Mercier told KOMO there’s a right way and a wrong way to impose an income tax.

“They’re trying to get the judges to do something they can’t do through the Democratic process,” [Mercier] said of the city.

If Seattle politicians want to see a graduated income tax put into place, he recommends they seek to change the laws openly through the legislative process.

“There is a way to change the constitution, there is a way to change state law — what we shouldn’t be doing is having our elected officials willfully and knowingly violating a state law or the constitution in the hopes of getting judges to do something that the electorate won’t,” he said.

We’ll let the U-B editorial board have the last word.

If the state Supreme Court doesn’t ultimately put an end to this effort to let cities (and, perhaps, counties) impose income taxes, the Legislature needs to fix the flaws in its 1984 effort.