Seattle City Council holds public hearing on income tax proposal

Seattle City Council is holding its first public hearing about an income tax proposal for high-income residents.

After weeks of leaders talking discussing this proposal, socialist City Councilwoman Kshama Sawant introduced legislation for it on Monday.

About the tax

Mayor Ed Murray made comments in the spring about the idea of proposing a 1.5 percent city income tax on "high-end" households and high earners.

According to a report a council committee in May, Seattle has the most regressive state and local tax system in the country. Regressive tax means the rate goes down as personal incomes go higher--lower income earners pay higher tax rates than the highest earners.

The new income tax proposal seeks to make the tax system more progressive by shifting more of the tax burden to the wealthy.

Sawant introduced actual legislation for the proposal on Monday. It creates an income tax of two percent on all income over $250,000 for an individual and $500,000 for a couple. For example, if a household has an income of $300,000, $50,000 of that would be taxed. And the city would collect $750.

Councilmember Lisa Herbold is co-sponsoring the legislation and Mayor Ed Murray is expected to endorse it.

What supporters say

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.

In early May, the City Council unanimously supported a resolution in favor of a Seattle income tax. The resolution did not make the tax official, but it expressed the council’s intent to “adopt a progressive income tax targeting high-income households.”

Sawant has taken to social media and held a town hall to build momentum behind her movement, which she calls “Tax the Rich.”

"For decades, poor and working class people in our state have paid far more of their income in taxes
than the super-rich. Now with Trump's billionaire-backed right-wing administration threatening massive tax breaks for corporations and the super-wealthy alongside vicious cuts to social programs for ordinary people, thousands are getting organized. We need to use this momentum by winning a tax on Seattle's rich this year," she wrote in a blog post.

Ned Friend, a software engineer, said he would be subject to the tax. He showed up at council chambers to voice his support, after seeing Steve Ballmer criticize the plan.

“What really makes a negative business environment is tent-lined, clogged highways, underfunded schools and our immigrants being attacked,” Friend said, “I’m eager to pay it because unlike many other things I can buy in a store, you can’t buy a better city in a store.  And taxes is our way to buy a better city.”

What opponents say

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.

One speaker told council members he considers this tax ‘theft.’

Another speaker, John Peeples, compared the council members’ ‘tax the rich’ slogan to a similar phrase on a sign once held by James T. Hodgkinson, who shot at members of Congress Wednesday morning. Peeples then clarified that he knew Hodgkinson was the only one responsible for his actions.

Peeples then said of the bill: “The legislation reads like a bitter response to a fair election that didn’t go your way – and intentionally, names a specific person as the target of your bitterness. You do not represent me in your bitterness and your desire to wield the people’s envy against some others in our community.”

Legislative obstacles for the tax

It’s illegal for cities to impose an income tax under the Washington state constitution, so if the tax passes, it 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.

He's not alone. Republican state Sen. Phil Fortunato has his own companion bill to Vick's. If Vick and
Fortunato are successful, then no attempt by any Washington city or county for an income tax will go anywhere in the future.