The controversial Seattle income tax had its first day in court Friday. The superior court hearing was a necessary stop on the road to the state Supreme Court. King County Superior Court Judge John Ruhl has said he plans to issue a ruling this week, before Thanksgiving.
Here’s a quick overview of what’s being written about the hearing.
Jason Mercier, with the Washington Policy Center, has a bulleted list. Among his observations:
Seattle argues this tax is on privilege of the benefits of living in Seattle. It is voluntary to live in Seattle. Says if you don’t want to pay the tax move to Bellevue (I need to check if @BellevueChamber is paying Seattle’s attorneys).
Based on today’s oral arguments and the prior briefs, I feel confident Judge Ruhl will find, as every other Washington judge has beforehand, that income is property, a graduated income tax is unconstitutional and local governments have no authority to impose an income tax.
The Stranger reports,
In defending the tax, lawyers for the city and the Economic Opportunity Institute argued Seattle is too dependent on regressive taxes that unfairly hit poor people. (The EOI helped craft the tax.)
…Attorneys defending the tax also made unusual arguments in hopes of bypassing unfavorable law and precedent. Along with a 1930s Supreme Court ruling against a state income tax, Washington State Law says “a county, city, or city-county shall not levy a tax on net income.” Lawyers defending the tax argued Friday against interpreting state law as a blanket ban on any city income taxes like the one passed by the city council.
They argued Seattle’s income tax is not on “net income” because the ordinance mandates a tax on “total income in the tax year in excess of $250,000.”
…But lawyers for the plaintiffs claim there is no meaningful distinction. The tax affects net income, they argue, and is 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.'”
Davis twice called the arguments from the city and EOI “the biggest bunch of legal malarky that I’ve ever heard.”
The Stranger report adds,
King County Superior Court Judge John Ruhl asked few questions Friday and gave little indication as to which way he was leaning.
“This is a very, very important issue and it deserves a lot of attention,” Ruhl said. “Obviously, it’s going to get lots of attention in the coming months from another court. I want to give it the attention it deserves at this level as well.”
A group of GOP state lawmakers in late September asked Washington state Attorney General Bob Ferguson to intervene in the case to uphold the constitutionality of that state law. If the court rules the state law unconstitutional, the lawmakers said, the ruling would apply statewide, and cities and counties could consider an income tax.
“As you know, our office defends the constitutionality of statutes when the state or a state agency is sued,” Ferguson replied in a document obtained by the Business Journal. “That is not the situation here.”
Ferguson’s office had not made a formal decision on whether to intervene as of late October, but he wasn’t in court Friday.
From KOMO News,
Former State Attorney General Rob McKenna also argued against the tax one behalf of both high and low wage earners.
He told the court the Constitution says all income must be taxed uniformly, but because state law doesn’t allow an income tax, the cities can’t impose one.
“The city keeps changing its explanation of the ordinance as it goes along, even from the very first hearing we held to its reply brief, it keeps shifting its arguments, it’s a sign of weakness,” said McKenna.
From Seattle Weekly, a strange financial argument from the city:
The way Paul Lawrence described it, King County Superior Court Judge John R. Ruhl now has a $100 million question before him.
Lawrence, who is representing the city in its effort to defend an income tax on high-earners, reasoned to Ruhl during oral arguments Friday that he should side with the tax, since it would ultimately be looked at by the Supreme Court, as well. If the Supreme Court disagrees with Ruhl and strikes the law down, then per the ordinance passed by the City Council, all money paid to the city by high-earners would have it paid back to them, with interest. However, if Ruhl puts the law on hold only to have the Supreme Court rule it legal, then the city will have lost out on a year’s worth of tax revenue—estimated to come in at $140 million.
Finally, here’s a good overview of the case from SCC Insight.