The Seattle City Council on Monday unanimously approved a plan to levy a 2.25 percent tax on the income of residents earning $250,000 or more annually. The Council estimates that the tax would bring in an additional $140 million each year.
The revenue would go toward the city’s housing affordability agenda and carbon reduction goals and supplant federal funds if they are cut. The revenue is also intended to alleviate the burden of Washington’s property and sales taxes, which are often called the most regressive in the country.
During the meeting on Monday, Councilmember Lorena Gonzalez introduced an amendment that allows some of the income tax revenue to go toward making business taxes less regressive. Despite opposition from Councilmember Kshama Sawant, the amendment passed five to three.
Sawant and Councilmember Lisa Herbold sponsored the income tax bill. Today is a crucial victory for them, but it isn’t the end of the road. The measure will almost certainly be challenged in court, as Washington state law says, “a county, city, or city-county shall not levy a tax on net income.”
This post has been updated to clarify that the quote above comes from the Revised Code of Washington.
Sawant and Herbold have stressed the importance of passing an income tax in the wake of the new state budget, which hikes property taxes to fully fund public schools.
In 2010, Washington voters defeated Initiative 1098, which would have instituted a state income tax on people making more than $200,000 a year by a two-to-one margin. It’s a controversial issue in the region.
“The people of Washington have made clear on multiple occasions that they do not want you to impose an income tax on them,” said one Seattleite at the City Council meeting Monday. “How many times do the targets of your undo attention and envy need to say ‘no’ before you respect their wishes?
But things have changed in the past seven years, particularly in Seattle. It is the fastest-growing city in the country and many of those newcomers are drawn to the region for lucrative careers in tech. Rent and home prices seem like they’re on an unending upward ascent. As the city’s wealthy population increases, many longtime residents feel pushed out.
The tech industry is split on the merits of a Seattle income tax. Former Microsoft CEO Steve Ballmer recently said the tax could create an “unfavorable business climate” in the city.
Madrona Venture Group Managing Director Matt McIlwain expressed a similar sentiment at a conference earlier this year, saying that people moving to Seattle to work in tech often tell him they’re are happy not to have an income tax. Chris Mefford, president and CEO of consulting firm Community Attributes, countered, arguing that it is “mathematically impossible to succeed fiscally” without an income tax.
Most attendees of Monday’s City Council meeting came out to voice support for the income tax measure during the public comment period. One supporter says he earns more than $250,000 per year and “could afford seven apartments.”
“That’s absurd, seven apartments,” he said. “I don’t want seven apartments. I actually think that anyone who wants to live here should be able to. Public housing and the other options we have to confront this housing crisis are all expensive. It’s important to me that we break from Washington’s shameful tradition of asking people who have the least to fund these projects. I support this bill.”