Olympia could nix Seattle income tax before it get started

by: BY MYNORTHWEST.COM, Staff report Updated:

Felipe Castro holds a sign advertising a tax preparation office for people that still need help completing their taxes before the Internal Revenue Service deadline on April 14, 2010 in Miami, Florida.
Joe Raedle/Getty Images

While Seattle is trying to adopt an income tax, two state lawmakers are taking steps to prevent it.

“Seattle has decided that they want to see if there is a loophole they can address,” said State Representative Brandon Vick. “If they can tax adjusted gross income, gross income, or capital gains or something of that nature. My bill takes the law and makes it clear. It removes the ambiguity. It says income means gross income, net income, capital gains, adjusted gross income, and it goes as far as to say to the courts to interpret this broadly. If anyone comes up with a cute idea, or vernacular to describe an income tax, that too is an income tax.”

RELATED: Seattle’s income tax proposal explained

Vick is a Republican representing the state’s 18th legislative district. He wants to pass a bill that will shut down any legal attempt that Seattle can take toward an income tax. He’s not alone. Republican State Sen. Phil Fortunato has his own companion bill to Vick’s. They plan to introduce them during the current special session.

“It says, ‘It’s illegal to do illegal things,’” said Fortunato, explaining his bill. “I mean, it’s not that hard — RCW 36.65.030, ‘Tax on net income prohibited. A county, city, or city-county shall not levy a tax on net income.’ That’s it.”

Seattle income tax

The city council passed a resolution expressing support of a local income tax, which is to take the tax proposal to the state’s Supreme Court. At the court level, the city wants to fight it out for the tax. If it can get the court’s approval, it can move forward with a progressive income tax.

Technically, Seattle or any governing body can implement an income tax, but state law says it has to be a uniform 1 percent across all levels. Seattle would rather have different tax rates at different income levels. The Emerald City isn’t alone; Vick notes that Olympia tried similar attempts and the City of Port Townsend is also making a move for an income tax.

But if Vick and Fortunato are successful, then no attempt by any city or county for an income tax will go anywhere in the future.

“My bill is actually pretty simple,” Vick said. “On the books right now is a law that says a city, county or city-county can’t impose an income tax, and what it says is net income. For 30 plus years, that’s been pretty clear. No one has challenged that. But we see now there’s a number of folks who have decided an income tax is the way they want to go for their city.”

It’s not just about firming up an existing law. Vick argues that the lack of an income tax has helped Washington recover from the recession. Fortunato said that rich people are good for the state’s bottom line and he doesn’t want to scare them away.

“A friend of mine is a cabinet maker and his customers are very rich people,” Fortunato said. “He’s not a rich guy, but he’s a great cabinet maker. If rich people didn’t have money to spend, he would be on food stamps. Rich people do things, they spend money, and that money they spend brings revenue to the state.”

“This whole notion of taxing the rich and the rich will pay for it? Well, they’re rich for a reason,” he said. “For one, they’re not stupid. If it takes moving out of the state (to stay rich), they will move out of the state.”

“If they want an income tax, hell, they can vote on it tomorrow … if you make a dollar, you pay 1 percent. If you make a million dollars, you pay 1 percent,” he added.

Story by MyNorthwest