Seattle income tax: A timeline of the legal challenges

On July 10, 2017, the Seattle City Council passed an income tax on individuals making more than $250,000 annually and households making more than $500,000 annually.

The tax would be on income in excess of that amount. So if a person made $300,000, the 2.2 percent tax would be on $50,000.

Opponents said the Washington State constitution has been clear since 1933, when the State Supreme Court said an income tax would be in violation unless it was imposed uniformly.

Attempts to have an income tax have been rejected by voters multiple times since.

Here is a timeline of Seattle’s income tax effort and efforts by opponents. The article will be updated as additional developments occur.

November 22, 2017: King County Superior Court Judge John Ruhl ruled against the Seattle income tax. "The City's tax is not an 'excise tax' and thus is not authorized by RCW 35A.82.020 and RCW 35.22.280(32); the City's tax is not authorized by RCW 35A.11.020; the City's tax is not otherwise authorized by any other statute; and RCW 35.65.030 prohibits the tax," Ruhl wrote.

Mayor Tim Burgess and City Attorney Pete Holmes said they would appeal. Read the judge's ruling here.

August 9, 2017: Two additional lawsuits were filed against the Seattle income tax. One was filed by the Freedom Foundation and the other was filed by the Opportunity for All Coalition, represented by former Washington State Attorney General Rob McKenna, former Supreme Court Chief Justice Gerry Alexander, former Supreme Court Justice Phil Talmadge, and Dan Dunne, a litigation partner at Orrick Herrington. Follow this link to read a PDF of the Freedom Foundation suit, filed on behalf of multiple individuals.

"Since courts rule on statutory matters first, that's where Seattle's income tax case is likely to end," McKenna wrote on his blog. "The courts shouldn't rule on the constitutionality of a graduated income tax unless the Seattle case somehow gets past the ban on local income taxes."

McKenna also noted in his legal brief that Attorney General Bob Ferguson declined a request to take action against the illegal Seattle income tax.

July 14, 2017: Seattle Mayor Ed Murray's office receives a court complaint from S. Michael Kunath, a Seattle resident who makes more than $250,000 annually. It is the first legal challenge to the Seattle income tax, and the lawsuit is expected to be the first of many.

In his suit, Kunath wants the Seattle income tax to be declared invalid and wants to be awarded costs, attorney fees "and additional relief as it may be warranted." City Attorney Pete Holmes previously said the income tax ordinance was drafted to defend against expected suits. Follow this link to read Kunath's full complaint.

July 10, 2017: The Seattle City Council voted 9-0 for an income tax 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. The amount increased from 2 percent to 2.25 percent. It was first discussed as a 1.5 percent tax.

The Freedom Foundation, a right-wing think tank based in Washington and Oregon, said it would challenge Seattle's effort for an income tax.

“In the wake of the Seattle City Council’s vote on Monday to approve an illegal, unconstitutional income tax, the Freedom Foundation is prepared to challenge the action in court – hopefully with a coalition of other freedom-minded organizations,” foundation staff said in a press release.

The ordinance states that “Washington State households with incomes below $21,000 paid on average 16.8 percent of their income in state and local taxes in 2015, whereas households with income in excess of $500,000 paid only 2.4 percent.” However the council did not address how many Seattle residents paid property taxes – the bulk of that taxation number – with an income at or below $21,000.

The ordinance mentions that Seattle sales tax “is among the highest in Washington State” – it’s actually the highest at 10.1 percent – but does not specify exactly what combination of taxes create the 16.8 and 2.4 percent numbers. Those figures come from the Institute on Taxation and Economic Policy.

When State GOP Chair Susan Hutchinson spoke against the tax in Seattle, she was surrounded by protesters with “Tax the Rich” signs that also supported socialist City Councilwoman Kshama Sawant and chanted to interrupt her statement.

"We are encouraging all to exercise civil disobedience -- to not comply, to not file and to not pay," Hutchinson said, adding the move is illegal, unconstitutional and against the will of the people that they have expressed through statewide votes.

Section 4 of the ordinance states it would take effect 30 days after it’s approved by Mayor Ed Murray, setting the date as August 9, 2017. The amount to be used to determine whether a taxpayer is subject to the high-earners tax is the Total Income line No. 22 on IRS Form 1040 or Line 15 of Form 1040A.

July 5, 2017: Seattle City Council's Finance Committee approves the income tax proposal. "This type of tax reform is especially important now and Seattle is going to start the conversation," Councilman Tim Burgess said. He also said, "The state legislature should follow our lead."

June 12, 2017: Socialist City Councilwoman Kshama Sawant proposed legislation to create an income tax of 2 percent on all income over $250,000 for an individual and $500,000 for a couple. That amount is higher than the original 1.5 percent discussed by the council and Mayor Ed Murray. Councilwoman Lisa Herbold co-sponsored the legislation.

May 24, 2017: Former Microsoft CEO Steve Ballmer warned that an income tax would hurt Seattle in an interview with KIRO Radio host Dave Ross. "Jobs would tend, there would be fewer jobs here with an income tax than without an income tax," he said.

The proposal is for a tax of 1.5 percent on high earners who live in Seattle. The tax would apply only to income over $250,000 per household.

May 15, 2017: Republican state Sen. Phil Fortunato has his own companion bill to state Rep. Brandon Vick's bill that would stop Seattle's efforts on an income tax. The bill, SB 5938, was introduced May 15, reintroduced May 23 and introduced during the third special session on June 21. But Fortunato's bill also died.

May 10, 2017: State Rep. Brandon Vick wanted a bill that would shut down Seattle's attempt for an income tax. The bill, HB 2212, was re-introduced on May 23 in the second special session and again on June 21 in the third special session. But Vick's bill died.

May 1, 2017: The City Council unanimously voted in favor of a resolution that would "adopt a progressive income tax targeting high-income households." Council members, who acknowledged expected legal challenges, said the effort was in part to "Trump-proof" Seattle. President Donald Trump's administration made threats to cut funding to sanctuary cities such as Seattle, and the resolution passed unanimously noted that threat as a reason to pass a Seattle income tax.

April 20, 2017: Seattle Mayor Ed Murray said he planned to propose a city income tax on high-end households. Murray was vague in a forum for mayoral candidates and said he would send a proposal to the City Council in the next few weeks. City Council candidates Cary Moon and Mike McGinn called for an income tax earlier that same week.

Information from the KIRO 7 and MyNorthwest.com archive is included in this report.

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