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Councilmember Lisa Herbold is pushing for a Seattle income tax. (Seattle City Council Photo)

The Seattle City Council released a proposal Tuesday to place a 2 percent income tax on the wealthy, which could have big repercussions for the tech industry’s highest earners.

The proposal would levy the tax on Seattleites with a combined household income more than $500,000 and single filers with income of more than $250,000 per year. The city estimates the tax would bring in $125 million in new annual revenue. Councilmembers Kshama Sawant and Lisa Herbold championed the tax proposal.

The city says the additional funds would lower property and other regressive taxes and replace federal funding that could be lost through President Donald Trump’s proposed budget cuts. The mayor’s office also says the cash would “enhance public services such as housing, education, transit, and/or create green jobs while meeting the City’s carbon reduction goals,” according to a statement released Tuesday.

Many of the high-earners targeted by the proposal work in Seattle’s booming technology industry, where even entry-level software engineers can sometimes command six-figure salaries. Tech isn’t the city’s only high-paying industry but it has become a lightning rod as Seattle adjusts to a population boom and affordability issues that put pressure on longtime residents with lower incomes.

Mayor Murray is working with the City Council to implement an income tax.
(GeekWire Photo / Monica Nickelsburg)

The proposal has been in the works since Mayor Ed Murray publicly asked the City Council to pursue a municipal income tax. Murray made the announcement when he was still in Seattle’s contentious mayoral race. Many of the candidates still in the race support a city income tax but actually implementing one will be an uphill battle. Washington state’s constitution prohibits local jurisdictions from levying an income tax, which is the reason the state relies so heavily on property and sales taxes. If the city votes to implement an income tax it will almost certainly be challenged in court.

“Washington state’s tax structure is the most regressive in the country, putting the burden on many of our most vulnerable residents,” Mayor Murray said in a statement Tuesday. “Leaving cities with only regressive tax options puts the heaviest burden on working people, families and communities of color. By replacing a system that relies too heavily on property and sales taxes with a progressive income tax, we can ease that burden and generate revenue to invest in Seattle priorities.”

Murray is no longer in the mayoral race but other contenders like former Mayor Mike McGinn and lawyer Nikkita Oliver support an income tax. Other candidates, like former U.S. Attorney Jenny Durkan and urban activist Cary Moon, have doubts about an income tax as a viable solution to the city’s funding issues.

Herbold and Sawant’s proposal is similar to a statewide income tax that voters defeated in 2010 by a two-to-one margin.

The Council will host an initial public hearing on the proposal on Wednesday. The city is expected to take final action by mid-July.

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