The City of Seattle is ready to take the income tax debate to court. A bill passed unanimously by the Seattle City Council on Monday sets in motion a plan to enact an income tax on Seattle’s wealthiest residents.
The bill establishes a timeline for the council to begin consideration of an income tax bill by May 31 with a goal of passing the legislation by July 10.
An income tax will almost certainly be challenged in court, as Washington’s Constitution states “a county, city, or city-county shall not levy a tax on net income.”
“The legal viability of a legislative proposal will be the primary consideration,” Councilmember Lisa Herbold said during a meeting Monday. “We really want the strongest proposal that we can design.”
Herbold is championing the income tax bill. She said Monday that she is working with Mayor Ed Murray, the Seattle city attorney Pete Holmes, and members of the Trump Proof Seattle Coalition to craft the ordinance.
Trump Proof Seattle is a non-profit that advocates for income tax reform in Washington to cope with federal budget cuts from the Trump administration.
The income tax issue has become a lightning rod in Seattle’s mayoral race. Former Mayor Mike McGinn pledged to support a city income tax when he announced his candidacy last month. Shortly thereafter, Mayor Murray said he would send a proposal for a tax on the wealthy to the City Council.
Seattle currently relies on state and property taxes for its funding.
“We don’t actually know how much we pay in taxes because so many of our taxes are buried in sales tax,” Herbold said Monday. “And transparency is a prerequisite for rational tax policy.”
Despite the Council’s actions, there’s no guarantee that a city income tax will actually be implemented or what it will look like if it does clear the court.
In 2010, voters defeated Initiative 1098, which would have instituted a state income tax on people making more than $200,000 a year and couples making above $400,000 a year, by a two-to-one margin. It’s a highly controversial issue in the region.
At a recent economic conference, economist Chris Mefford said he believes “it is mathematically impossible to succeed fiscally without a state income tax.”
Madrona Venture Group Managing Director Matt McIlwain countered, saying that tech talent is drawn to the region, partially, because of its lack of income tax. He said the current property and sales tax system is more than adequate to fund the city.
“We have a tax revenue problem, and the problem is what are we going to do with all the incremental tax revenue we have received from our three primary sources,” McIlwain said.
Seattle’s growing population of wealthy technology workers may not be the explicit target of the income tax proposal, but they’re certainly on the minds of the lawmakers pushing this legislation.
“Here, we have the tragic irony of the two richest people of the world living right next to thousands of people with no homes at all,” Councilmember Kshama Sawant said, referring to Microsoft co-founder Bill Gates and Amazon CEO Jeff Bezos. “And far from paying their fair share, Seattle’s wealthiest pay the least in taxes.”
Councilmember Herbold, Trump Proof Seattle, and other advocacy groups are hosting a Town Hall to discuss the income tax proposal Thursday.