On Monday, the Seattle City Council approved a city income tax targeting high-income households.
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.
Here’s what to know now.
Why Do City Leaders Call It A Progressive Tax?
According to a report a council committee in May, 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.
How Was It Passsed?
Mayor Ed Murray made comments in the spring about the idea of proposing a city income tax on “high-end” households and high earners. It came after threats from the Trump administration that
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.
Last week, a council committee passed it, and it went for a full vote on Monday.
The decision comes a couple of weeks 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.
There are three key legal barriers, according to Mercier: The state constitution says taxes must be uniform within a class of property; a 1984 state law bars cities from taxing net income; and cities must have state authority to enact taxes.
Seattle may assert that taxing total income is different from taxing net income, while also seeking a ruling that income isn’t property.
“We are greatly disappointed,” Washington Policy Center’s president, Dann Mead Smith, said in a statement after the vote.
“As a lifelong Seattle resident, it is frustrating to see the Seattle City Council choose to waste taxpayer dollars on lawsuits for an income tax that is not needed.”
The Freedom Foundation, a conservative think tank based in Olympia, announced in a statement that the organization was prepared to challenge the tax in court — “hopefully with a coalition of other freedom-minded organizations.”
“No matter who starts out paying it, everyone will eventually suffer,” foundation CEO Tom McCabe said in the statement, warning that the tax would creep down the income ladder.
But Sawant insisted her only desire is to “tax the rich,” and Herbold said the legislation has been designed to give the city its best chance in court.