Moving forward with efforts to institute a more progressive tax system in Seattle, Mayor Ed Murray and city council Members Kshama Sawant and Lisa Herbold have revealed the details of their proposed high earners income tax.
According to a draft ordinance Herbold released Monday, if the proposal is approved, a 2 percent tax will be placed on single households making more than $250,000 annually and joint households making more than $500,000.
Currently, those households pay, on average, 2.4 percent of their income in state and local taxes, according to the Institute on Taxation and Economic Policy. In comparison, households making less than $21,000 pay 16.8 percent in taxes.
It is for this reason that Murray said Washington's state tax structure is one of the most regressive in the country, "putting the burden on many of our most vulnerable residents... working people, families, and communities of color."
"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 release. “A tax on high incomes will give Seattle a more equitable revenue structure."
That new structure is expected to create $125 million in profit each year. The proposal claims the generated income will allow the city to "lower the burden associated with property taxes and other regressive taxes," account for funding that might be lost due to President Trump's budget cuts, support public services including housing, education, and transit, and/or create environmentally friendly jobs to meet the city's carbon reduction needs.
This is the latest development in the process since the city council unanimously approved a resolution to pursue the tax in early May.
Though the proposal has the support of the mayor and the city council, it is likely that it will be challenged in state courts if approved. The state constitution reads that taxes must be uniform within the same class of property, and the Supreme Court has ruled income is property. Additionally, a 1984 state law prohibits counties and cities from taxing net income.
However, the ordinance also states that according to the Tax Foundation, nearly 5,000 local governments levied local income taxes as of 2011. Still, Seattle would be the first jurisdiction in Washington state to impose a city-wide income tax.
The city council is holding a public hearing regarding the proposal Wednesday. It is expected they will reach a conclusion mid-July.