Seattle City Council unanimously approves income tax for high earners

SEATTLE  — The Seattle City Council unanimously approved an income tax on wealthy residents Monday. The tax now awaits the mayor’s signature.

The progressive income tax imposes a new 2.25 percent income tax on the city’s highest earners. Personal income in excess of $250,000 for individuals and in excess of $500,000 for those filing joint tax returns would be taxed at that rate.

Mayor Ed Murray issued a statement that reads, in part: “Seattle is challenging this state’s antiquated and unsustainable tax structure by passing a progressive income tax. Our goal is to replace our regressive tax system with a new formula for fairness, while ensuring Seattle stands up to President Trump’s austere budget that cuts transportation, affordable housing, healthcare, and social services. This is a fight for economic stability, equity, and justice.”

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Supporters of the new tax say the city's explosive economic growth and prosperity has created significant wealth and opportunity, but it has also exacerbated the affordable housing crisis that has put a strain on those in lower income brackets.

Washington is one of seven states without a personal income tax, and a state law passed in 1984 prohibits a county, city, or city-county from levying a tax on net income.

A Seattle tax would be a step toward building political momentum for the state and its other cities and towns to enact progressive tax systems, the city council said in resolution earlier this year endorsing the idea of an income tax.

"State tax reform is urgently needed so our lowest-income residents pay less, our middle-class neighbors pay about the same, and our highest-income residents pay more," Councilmember Tim Burgess said in a statement Wednesday after the proposal advanced out of his finance committee.

The measure is certain to face a court challenge from opponents who call the tax proposal illegal, unconstitutional and a waste of taxpayer money. If passed, city leaders are likely to keep expanding and increasing the tax over time, they said.

The council is "going to unanimously adopt an illegal income tax that has no hope of taking effect and will waste taxpayer resources on litigation the city is sure to lose," said Jason Mercier, who directs the center for government reform with the Washington Policy Center.

At a rally Monday before the vote, Seattle Mayor Ed Murray said the city expects a legal challenge.

"We welcome that legal challenge. We welcome that fight," he said. If the city wins that battle, "it won't just be Seattle that's doing a progressive income tax," he added.

The city estimates the income tax will raise about $140 million a year. Under the measure, revenue could be used to lower property taxes, pay for public services such as transit and housing, replace any federal money that is lost and meet carbon reduction goals.

Voters in the state have rejected personal income tax-related measures at the statewide ballot several times over the past eight decades. They did approve an income tax in 1932, but the state Supreme Court ruled the measure unconstitutional the following year.

Mercier said there is decades of case law saying that a graduated income tax is unconstitutional because income is property and under the constitution, property tax has to be taxed uniformly and no more than 1 percent.

The council proposal notes that the state has among the most regressive tax systems in the country.