Why Seattle Income Tax Proposal Might Have Statewide Ramifications

SEATTLE, WA - A bill to tax high-income earners in Seattle was released Monday and by Mayor Ed Murray and council members Kshama Sawant and Lisa Herbold. The income tax, if approved by the full council, would likely meet a legal challenge - but that's the point. A legal challenge would allow income tax proponents to change legal precedent, making it possible for other local governments - or the state - to institute an income tax.

The proposal released Monday would impose a 2 percent tax on married couples earning $500,000 or more, or on individuals earning $250,000 or more. The city estimates the tax could bring in an extra $125 million, which would go toward "Trump-proofing" Seattle: ensuring that programs related to law enforcement, education, transit, and social programs would be insulated from the president's budget cuts. The extra revenue would also be used to lower property and sales taxes.

According to the U.S. Census, about 25 percent of full-time individuals in Seattle earn more than $100,000 per year; about 10 percent of Seattle households earn $200,000 or more.

The reason Seattle officials want to push an income tax plan right now - and Murray has said so in the past - is to get the issue into court. In 1932, voters in the state approved an income tax, but the initiative was later struck down by the state Supreme Court in the case Culliton v. Chase. Other income tax initiatives have been on the ballot since then, but none have passed, and so there hasn't been a chance to bring the issue to court.

If the City Council passes the income tax, advocates have the opportunity to overturn that 1932 precedent. If the precedent is overturned, that could make way for other local income taxes or a statewide income tax.

In advocating for a local or even statewide income tax, proponents point to Washington having one of the most "regressive" tax structures in the U.S. Because local governments and the state rely on sales and property taxes, low-income people end up carrying a bigger burden. That's because someone earning a low income pays a higher share of their earnings toward taxes than a rich person.

"People earning $20,000 a year devote two entire months of pay to their yearly tax bill; the 1 percent pay their annual tax bill in only six days,” Herbold said in a statement. “A tax on high incomes will give Seattle a more equitable revenue structure to fund affordable housing and services addressing homelessness, education, transit, and climate change, and it could also be dedicated to lowering other regressive taxes and replacing federal funding potentially lost to Trump budget cuts."

In 2016, the city of Olympia put a high-earner income tax on the ballot to fund public college education for residents, but voters rejected the measure.

The City Council will hold a hearing on the income tax proposal on June 14, and might vote on the issue in early July. The earliest the tax would go into effect is January 2018.

Image via Kshama Sawant