This week Seattle’s city council passed a tax of 2.25 percent on individual incomes above $240,000, or $500,000 for joint filers. Supporters waving bright red “tax the rich” signs greeted this development with cheers. But the tax is dubious economic policy—and almost certainly illegal under Washington state law.
Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, says the income tax runs up against a number of legal hurdles. “The first,” he tells Reason, “is the city has to have a grant of authority from the state to impose any tax.” Not only does Seattle not have that specific statutory authority, but a 1984 state statute bars any “city, county, or city-county” from “levy[ing] a tax on net income.”
The tax proponents claim that the new statute taxes “total income” rather than “net income,” and thereby should be allowed. Former Washington Attorney General Rob McKenna and former State Supreme Court Justice Gerry L. Alexander dismissed that argument in a Seattle Times op-ed, arguing that it is “a tax’s practical effect, not its label,” that matters.
The tax also runs afoul of the state constitution, which declares that “all taxes shall be uniform upon the same class of property.” Not one, not two, but three Washington Supreme Court decisions have declared that income is property. If income is property, and if taxes on property must be uniform, Seattle’s non-uniform income tax clearly violates the constitution.
These problems do not seem to concern the Seattle City Council. When Progressive Army asked her about the legality of the new tax, Councilmember Kshama Sawant replied: “History shows that unjust laws need to be overturned and the only way to succeed is for ordinary people to build mass movements.”
Sawant, a member of the Socialist Alternative Party, was elected in 2013 along with the current mayor, Ed Murray. Both have been instrumental in passing a number of prized progressive policies, including a soda tax, a $15 minimum wage, and the nation’s second “secure scheduling” ordinance, which mandates that employers set their employees’ schedules weeks in advance and penalizes companies for changing them.
But these progressive policies tend to have harsh regressive effects. The minimum wage will eliminate jobs, “secure scheduling” will probably bring cuts in hours, and the soda tax will raise the cost of living.
That same disregard for a law’s actual consequences was at play when the city council passed its income tax. Councilmember Lisa Herbold—one of the law’s sponsors—said it moved Seattle’s regressive revenue system toward “tax fairness.” Yet the new tax law does nothing to actually lower the burden of property and sales taxes on lowe-r and middle-income Seattleites. It just layers a new levy on top of the others.
But the new law’s legal and policy problems do not seem to be important to Sawant, who touts the tax as a symbol of rising people power. “Our growing movement has now won $15 and taxing the rich,” she said in a statement after the tax’s passage. “We can continue organizing to win not only rent control, but a world free of exploitation and oppression.”