by Sharayah Lane
Monday’s Seattle City Council meeting ended in a long, joyful standing ovation as the council unanimously voted to tax the city’s high income earners making way for the first progressive tax in recent year. The vote also set the stage for the looming legal battle needed to turn the bill into a reality.
“Seattle is a progressive city, but you wouldn’t know it by looking at our regressive tax structure, and that includes the taxes paid by small businesses. When our poorest households are paying 16% of their income in state and local taxes while our highest earners are paying only 2.4%, we have a very clear problem,” said Councilmember Lisa Herbold, who co-sponsored the bill. “Today we are taking a step in the right direction, toward tax fairness.”
CB 119002 would effectively impose a tax of 2.25% on every dollar earned above $250,000 for individuals and $500,000 for joint filers, resulting in projected tax revenue of $140 million in the first year. The revenue has a required designated use for:
- Providing public services including housing, education and transit
- Creating green jobs and meeting carbon reduction goals
- Replacing federal funding lost to potential federal budget cuts
The tax would require an estimated $10 million in implementation costs and $5 million annually for upkeep.
Monday’s celebrations were short lived, however, as supporters anticipated a surefire legal battle ahead.
Standing in the way of the legislation’s implementation is a 1933 State Supreme Court decision. It declared state income tax unconstitutional deeming personal income “property” and therefore protected from becoming an excise tax.
Still, the city has committed to entering the legal battle and has set aside all of next year to work through litigation.
“Given the likely legal challenge and the potential implementation delay associated with establishing a system of collections and enforcement, revenues are not expected to be realized in 2018,” states the bill.
The victory for a progressive tax comes after nationally recognized economist Dick Conway, who has studied Washington state taxes for over 20 years, revealed that Washington is the most regressively taxed state in the country.
Regressive taxes are taxes that disproportionately impact lower income people.
“How has state and local tax measures performed over the years? In a word: poorly,” said Conway, “Long-term decline has created a dilemma and if lawmakers don’t increase and remedy our state and local tax structures it will further exacerbate the regressivity that has made us the worst in the nation.”
As supporter after supporter gave public comment supporting the measure, including The Raging Grannies breaking out into song about Seattle’s “failed tax system” and several software developers who welcomed the opportunity to pay more in taxes. In contrast, there was a sole voice of opposition at Monday’s hearing. John Peeples of Washington’s 43rd Legislative District – which includes downtown Seattle, First Hill, Capitol Hill and South Lake Union- explained why he was against taxing the rich.
“This city is targeting certain people rather than building people up from the bottom up and teaching people how to budget and take responsibility for themselves,” said Peeples, “I’m much more in favor of each person doing his best to uphold his end of the social contract before going to the government which should be the last resort. I’m thoroughly convinced that there are ways that the city can reduce its footprint and expenses to make all of this unnecessary. ”
The vote to implement an income tax in Seattle comes 7 years after a statewide measure was defeated 63 % to 37%. Washington is one of only seven states that do not currently have a state income tax. On state ballots in 2010, I-1098 would have imposed a 5% tax on individual income above $200,000 and joint filers above $500,000. The goal was to ultimately eradicate statewide property taxes.
However, the bill was defeated largely due to the notion that the state income tax would only creep down into lower income brackets, eventually impacting working class people.
That was the 7th time Washington state voters rejected a state income tax.
As an overflowing council chambers celebrated yesterday’s victory for income tax proponents, the widening gap between the state’s prohibitions and the city’s desires appeared to increase as many called for a vote on rent control, which is also currently prohibited at the state level.
An earlier version of this article mistakenly identified the income tax on high-income earners as 2.5 percent. It has been corrected to 2.25 percent.