Seattle City Council votes to pursue municipal income tax, setting up court challenge

Members of the Seattle City Council yesterday announced their intent to enact an income tax in the city. The Seattle Times reports,

Seattle took its first step Monday toward enacting an income tax, as the City Council voted unanimously to approve a resolution drawn up by Councilmember Lisa Herbold and others.

Herbold’s resolution, sponsored with Council President Bruce Harrell, expresses the city’s intent to adopt “a progressive income tax targeting high-end households” by July 10.

While details are yet to come, this looks like a deal that will come together.

The resolution leaves undetermined several key details: what type of household income would be taxed, which households would be considered high-end, at what rate the income would be taxed, how the revenue from the tax would be spent and how Seattle would go about collecting it.

Despite the unknowns, the resolution carries weight. Supported by Mayor Ed Murray, it sets up the council to pass an ordinance actually enacting the tax.

The resolution says the council will begin considering such an ordinance by May 31, with the goal of passing it in July.

The story goes on to report that council members expect and welcome a legal challenge to the city ordinance, hoping that the state Supreme Court will reverse its 1930s ruling that income is property, which must be taxed uniformly at a maximum rate of 1 percent. That would tee up a statewide progressive income tax without requiring a constitutional amendment.

Unlike their counterparts in Olympia, city council members in Seattle appear ready to act on their own, without a referendum. In Olympia, a proposed municipal income tax was overwhelmingly rejected by voters in November. Ahead of the election, the mayor of Olympia and a former state Supreme Court chief justice wrote an op-ed concisely stating their objections to the proposal. We wrote then,

It’s surprising the measure made it to the ballot at all. In August, a Superior Court judge ruled the initiative went beyond the scope of local initiative power. That decision was appealed and an appellate court commissioner allowed the initiative to appear on the ballot. And, as we’ve written, a prominent legal scholar and income tax proponent has said that the initiative is unlikely to pass constitutional muster

It’s unclear how the court will receive the Seattle ordinance. But we’re likely to find out.

Ahead of yesterday’s action, the Seattle Times editorial board counseled against the tax.

Washington’s largest city could play a leadership role in conversations about whether the state’s tax system is adequate, dependable and fair.

Or Seattle politicians could put on another circus, leaping over each other and doing back flips to please powerful backers and voters looking for symbolism.

So far the latter is what’s happening at City Hall, where the City Council is expected to vote Monday on a quixotic income-tax proposal.

Despite temptations to tout progressivity on May Day, the council should hold off.

The editorial points out the city’s attempt to push an income tax complicates discussions in Olympia, where Democrats are still hoping to adopt a capital gains tax. Further, the editorial says, “City Hall is awash with cash.”

Over on the business pages, columnist Jon Talton takes a different view. Sort of.

Jason Mercier, with the Washington Policy Center, has another suggestion.

The City of Seattle should direct its income tax efforts toward attempting to convince the Legislature and citizens of the wisdom of enacting an income tax in the only way that is legally possible in Washington state – by passing a constitutional amendment. Since state voters have already rejected five income tax constitutional amendments Seattle is trying instead to pass an illegal income tax in hopes the state Supreme Court will do a 180 on 84 years of case law.

It’s going to be an interesting spring in Seattle.