Seattle City Council approves income tax for high-earning residents

Seattle skyline file photo. Credit: Thinkstock
↓ Advertisement ↓

The Seattle City Council unanimously approved a new city income tax for high-earning residents on Monday.

"We are here not to tax ordinary working people; we’re here to tax the rich," Seattle City Councilmember Kshama Sawant said at the city council meeting.

Under the ordinance, wealthy residents would pay a 2.25 percent tax on income in excess of $250,000 for individuals and in excess of $500,000 for married couples who file taxes jointly.

Supporters estimate between 10,000 and 11,000 people would be subject to the tax, based on past Census Bureau data.

The city estimates the income tax will raise about $140 million a year.

Seattle Mayor Ed Murray called the ordinance a "fight for economic stability, equity, and justice.”

↓ Advertisement ↓

“Seattle is challenging this state’s antiquated and unsustainable tax structure by passing a progressive income tax,” Murray said in a statement.

Supporters say the tax would provide a progressive revenue stream to pay for crucial city needs such as affordable housing, transit, homeless and other services. They also want to test the legality of an income tax in Washington state.

"We also know that when Mayor Murray signs this into law on Friday, we will have won a battle, but the war will just be beginning," said Katie Wilson, secretary of the Transit Riders Union.

Supporters referenced an expected legal challenge since opponents say the tax is illegal and unconstitutional. At issue, the uniformity provision in the Washington state constitution, which states “taxes need to be uniform upon the same class of property.”

Since the 1930's, the court has ruled that income is property, meaning the city’s plan wouldn’t be legal unless the State Supreme Court reinterprets the law.

Both supporters and critics acknowledge Washington has a very broad definition of property, as defined by the current law.

"The word 'property' as used herein shall mean and include everything, whether tangible or intangible, subject to ownership," reads Article VII of the state constitution.

Murray and other ordinance supporters said the city welcomes that legal challenge, expecting this to potentially serve as a test case before the Supreme Court.

"Our Supreme Court may be the final word on Seattle’s proposed high earners income tax, but remember this is the same court that has held our state legislature in contempt for failing to adequately fund public education," said City Attorney Pete Holmes.

It's unknown when a suit could be filed or who would bring it forward.

Supporters of the tax said that the measure entered disputed legal territory. Even if the case was expedited, it could take over a year before the case is settled, and possibly longer before the city would get revenue.

Critics claim it could spur people to move outside city limits.

"This illegal and undesired income tax will lead to business owners and community leaders leaving the city for a more favorable business climate," said King County Republican Party Chair Lori Sotelo.

Critics also warn that the tax would be increased and expanded over time.

"Starts out as a tiny tax, then becomes a huge tax on the people," Washington state GOP Chair Susan Hutchison said.

The Associated Press and Allison Sundell contributed.