Seattle Taxpayers Challenge City’s ‘Millionaire Tax’

Published September 7, 2017

Assisted by a regional think tank, taxpayers are suing the City of Seattle over a recently enacted “millionaire tax.”

The Seattle City Council in July approved an ordinance requiring individual residents earning more than $250,000 a year, or households earning more than $500,000 a year, to pay a 2.25 percent annual income tax.

On August 9, 18 Seattle residents filed a lawsuit in the Superior Court for King County, arguing the tax violates a state law prohibiting municipal income taxes.

Lawyers from the Freedom Foundation, a think tank with headquarters in Washington and Oregon, are representing the Seattle taxpayers in court.

Judge John Ruhl has not yet scheduled a date for opening arguments in the case.

Source of State Pride

Paul Guppy, vice president for policy research at the Washington Policy Center, says the state’s voters have consistently opposed proposals to impose income taxes.

“Washington state has a long history of not having an income tax,” Guppy said. “People are proud of it.  People have voted nine times on the question of whether we should have an income tax, and it went down in flames every time.

“People across the state hate the income tax,” Guppy said. “The reason people don’t like the income tax is that there is a broad feeling that not having an income tax gives our state, and Seattle too, a huge competitive advantage.”

Groundwork for Statewide Tax?

Patrick Gleason, director of state affairs at Americans for Tax Reform, says the Seattle tax is a test run for creating a statewide income tax.

“Seattle’s City Council passed this tax knowing that it would be challenged in court, and for the purpose of it being challenged in court,” Gleason said. “Their hope is that an activist state supreme court will overturn 80 years of case law and precedent, and in doing so, open the gates for a statewide income tax, which is their ultimate goal.”

Gleason says he’s confident the courts will overturn the tax ordinance.

“All that will happen is that Seattle will have wasted local taxpayer dollars on court costs and legal costs, defending an unconstitutional law they knew would get struck down in court,” Gleason said. “If an activist Supreme Court did overturn those years of precedent, it would naturally have ramifications for the Washington state economy, in terms of job creation and economic growth.”

Attracting Talent

Seattle’s lack of a city income tax is a selling point for local employers seeking high-performing job candidates, Guppy says.

“People in the high-tech boom going on in Seattle, leaders of biomedical, aerospace, software, and other companies, point out that one way they are able to recruit top talent worldwide is because we have no income tax in Seattle,” Guppy said.