Since the Seattle City Council approved a city income tax targeting high-income households over the summer, it’s been met with legal challenges.
The council voted 9-0 for the ordinance, which would establish an income tax on individuals in Seattle earning more than $250,000 annually and married couples filing jointly who earn more than $500,000 a year.
On Friday, opponents and supporters of the tax will bring their arguments to a judge around 8:30 a.m. Meanwhile, demonstrators will hold a rally outside to show support for reform.
Here's what to know about the tax.
According to a report from the city council, Seattle has the most regressive state and local tax system in the country. A regressive tax means the rate goes down as personal incomes go higher; lower income earners pay higher tax rates than the highest earners.
The income tax should move Seattle toward a more progressive tax system because it is intended to reduce regressive taxes such as property taxes, and finance priorities like addressing the homelessness crisis and offsetting federal budget cuts, according to the council.
Former Mayor Ed Murray made comments in the spring about the idea of proposing a city income tax on “high-end” households and high earners.
After the city council unanimously supported a resolution in favor of a Seattle income tax in May, Socialist Seattle Councilwoman Sawant introduced actual legislation for the proposal in mid-June. Councilmember Lisa Herbold is co-sponsoring the legislation and Murray endorsed it.
A full council passed the tax in July, despite legislative obstacles at the state. Scroll down to read about that.
The decision came after the state's recently-passed $44 billion budget. The budget is getting criticism from King County financial analysts who believe it largely comes at the expense of Puget Sound residents who will see large tax hikes and limited increases in local school funding.
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It creates an income tax of 2.25 percent all income over $250,000 for an individual and $500,000 for a couple.
For example, if an individual makes $300,000, it doesn't tax the entire $300,000, just $50,000 of it. So the city would get $1,125.
The council estimates that tax would raise about $140 million annually and says fewer than five percent of the city’s households would pay.
It’s illegal for cities to impose an income tax under the Washington state constitution, so if the tax will no doubt be challenged and likely reversed.
If the council can get the court’s approval, it can move forward with a progressive income tax.
State Rep. Brandon Vick told KIRO Radio that he wants to pass a bill that will shut down any legal attempt that Seattle can take toward an income tax.
Vick's efforts would have blocked income tax attempts by any Washington city or county from going forward.
But Vick's bill died after being introduced in each of the three special sessions.
Proponents of the tax say it would create a more even playing field in a city that's becoming too expensive for low- to middle-income taxpayers to afford.
Dozens of voters spoke during a hearing before the council vote on Monday, and many have participated in the "Tax the Rich" movement.
Sawant built momentum behind that movement.
When the tax passed on Monday afternoon, the city hall chamber burst into applause from supporters of the tax.
The "tax the rich" narrative has another side.
Critics say the majority of the wealthiest taxpayers in Seattle are small-business owners, managers and professionals with incomes of $250,000 or more.
Some believe a progressive tax would create an unfriendly business climate and could drive companies away or prevent new ones from forming.
KIRO 7 News talked to former Microsoft CEO Steve Ballmer, who said in May that an income tax would hurt Seattle.
'There would be fewer jobs here with an income tax than without an income tax,” Ballmer said.
Ballmer believes tech companies would have to pay higher wages to maintain their competitive advantage over California, which has a 14 percent income tax.
KIRO 7 wanted to know about the challenges of implementing a Seattle income tax.
We asked Seattle University Taxation Professor Susan Weihrich to take a look at the draft ordinance with us.
Weihrich noted there only seven states that don't have an income tax, and our search found none them have cities that levy their own income taxes like Seattle would.
"You're going to have to have people who audit tax returns, because there's not already that structure in place because we don't have a state income tax,” said Weihrich.
Washington D.C. collects an income tax on its own. The tax agency's budget is $30 million.
“The major challenge for the city is getting the infrastructure in place so they can collect the tax fairly," said Weihrich.
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