Washington State

Lawsuit Says Seattle's Income Tax Illegal, Unconstitutional

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Tax the rich, not our future placard
Plashing Vole/Flickr

Seattle's "almost certainly illegal" income tax, passed last month, is already the subject of three separate lawsuits charging that it is, well, illegal.

The latest was filed yesterday by the Freedom Foundation—a conservative think tank in Washington state—and Seattle law firm Lane Powell PC, who say the new city-level 2.25 percent levy on high income earners clearly violates state law and the state constitution.

"The first issue with it," Freedom Foundation attorney David Dewhirst says, "is that it's plainly illegal. I think it's a major problem when politicians don't feel bound by the law they know exists."

The Seattle income tax violates a 1980 statute passed by the Washington Legislature which says, "a county, city, or city-county shall not levy a tax on net income," Dewhirst says.

The Seattle City Council has tried to skirt this prohibition by taxing total income rather than net income as described on various IRS forms. The Seattle income tax ordinance points to line 15 on IRS form 1040, which is a figure calculated after one has already deducted business, capital, and farming losses.

The problem with that, says Dewhirst, is the "total income" figure in the federal tax code is a net income measurement.

Truly taxing total, or "gross", income would mean taxing one's income prior to any deductions or exemptions. One's net income is what is left to be taxed following those deductions and exemptions, he says.

"It's a net number because its assessed after you've already taken some deductions out," Dewhirst says. "You've already reduced your gross amount at that point."

His lawsuit also charges Seattle's income tax violates the state constitution's uniformity clause, which requires all taxes in the same category of property to be uniform. Three separate state supreme court decisions from the 1930s onward have ruled income is property and must be taxed uniformly.

Seattle's progressive income tax violates that clause. The Seattle City Councilmembers who voted for the tax acknowledge as much, and are banking on the State Supreme Court ignoring past precedent and plain constitutional language for sake of justice.

"History shows that unjust laws need to be overturned," said council member Kshama Sawant, when asked about the constitutionality of the income tax ordinance.

Seattle City Attorney Pete Holmes struck a similar chord. "We think we have a good opportunity to present facts to the Supreme Court about the problems facing modern cities, which are much different from the problems facing cities in the 1930s. Taxing is a lightning rod issue, and it's something right-wing groups continue to mine for political advantage"

Holmes tells Reason, he thinks Seattle's ordinance has "a reasonable shot" of being upheld.

Dewhirst, for his part, is optimistic that Seattle's income tax will be struck down, saying that the Washington Constitution included a uniformity clause to prevent the kind of progressive and redistributive taxation the City of Seattle is currently pushing.

The framers of the Washington Constitution, he says "had a very acute interest in being left alone. They had strong libertarian impulses, so they felt like everybody has to share the tax burden to some extent."

Washington state currently has no income tax, and Washington residents have continually rejected attempts to impose one at the ballot box.

Fifty two percent of Olympia residents said no to a proposed city income tax in 2016. A state-wide income tax on the 2010 ballot was crushed, with 64 percent voting no. Nine ballot initiatives proposing some form of progressive income tax have gone before Washington voters since 1934, and all have been voted down.

Ultimately, says Dewhirst, Seattle's decision to go ahead with an income tax in the face of state law, the state constitution, and the state's historical anti-tax sentiment is extremely worrying.

"We find this lawless behavior on behalf of any elected politician is really troubling, and a bad indication for the rule of law."

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65 responses to “Lawsuit Says Seattle's Income Tax Illegal, Unconstitutional

  1. Only Seattle’s? Damn

    1. I feel weird praising Washington, but they had the prescience to ban income taxes.

      1. Net income taxes. They still allow gross income taxes.

        1. Any inkling as to why the law was phrased that way? Because the state does not have an income tax, and it seems like that would have happened already. Plus, the strangeness of the Seattle law not just taxing Gross income.

          1. I believe it was phrased that way in anticipation of a lawsuit. The state law is clear, so I believe they were trying to narrow the definition of ‘income tax’.

            In addition, Seattle is a city that passes a lot of ‘symbolic’ legislation because it’s a city that collectively feels, but doesn’t collectively think. Who cares if it ultimately survives? The council made a bold move and did the right thing.

          2. Because special interests cannot get accounting magic introduced to “help the children”.
            Think of all the lawyers, accountants, and computer programs that would be out of work if the feds taxed gross income instead of the ton of exceptions and deductions they have now.
            The envorinmental impact of paper reduction alone would justify the change.
            New 1040:
            total income
            tax due = total income times tax rate
            tax withheld
            balance = tax due – tax withheld

  2. “We find this lawless behavior on behalf of any elected politician is really troubling, and a bad indication for the rule of law.”

    I’m torn between feeling pity and contempt for people who sincerely invoke the rule of law as a relevant concern.

    1. That’s no surprise, you’re not very bright.

  3. The Seattle City Council has tried to skirt this prohibition by taxing total income rather than net income

    you idiots thought we weren’t going to touch your gross earnings? oh yes, yes we are. love, Seattle.

    1. It’s like they don’t want ANYBODY to actually live there.

      1. any city that can’t keep an NBA team…

        1. …has some virtue.

  4. It’s a shame, really: the way the right wing politicizes tax cuts for millionaires.

  5. “History shows that unjust laws need to be overturned,” said council member Kshama Sawant, when asked about the constitutionality of the income tax ordinance.

    Fuck Off, Slaver. No, you don’t get to do whatever the fuck you want to do

    1. But isn’t that a slave name?

      1. No. Kshama Sawant is an Indian-American socialist woman. Not a slave name, but she’d like to impose wave slavery on the populace of Seattle, and (since they elected her) they deserve everything that she’ll do to the city.

        She’s actually the most powerful politician in the area (certainly more powerful than the mayor, whose sexual misconduct issues have robbed him of what little power he had). She is beloved by the labor unions and student activists, and she could probably shut the city down if she chose to do so.

    2. No, no, the council member is absolutely right. The unjust law preventing me from summarily executing Kshama Sawant clearly needs to be repealed.

      1. That unjust law does not really prevent you, it merely raises the possibility you might be caught and prosecuted.

  6. It’s like the most beautiful place in the world is run by grotesques.*

    *Raised in Western WA. Have many feels for the Sound.

    1. It’s the one and only reason this place isn’t Detroit.

      1. Reference?

  7. I wonder how long it will take a crafty Leftie in Seattle to think of taxing everyone at 100% and then rebating money based upon the amount taxed.

    1. by rebate you mean gulag?

    2. This is the kind of thinking that actually goes on here. For instance, Serial Fabulist, Tim Burgess effectively banned the sale of guns inside city limits (illegal by state constitution) by passing a firearm and ammunition tax which ran all the gun stores out of town.

      The tax was ineffective by Burgess’s own standards, the money isn’t being spent on what it was slated for, but that was never the goal.

      Also, see “Democracy Vouchers”.

      1. Is that the law that just failed its challenge to the Supreme Court?

        1. Federal Court I mean. There was a gun tax law I heard about here, but am not familiar with the details.

          1. It essentially levies a $25 tax on every firearm sold and a $.05 tax per round of ammunition sold.

            Gun and ammo sales nearly dropped to zero after that, Tim Burgess refused to disclose the tax intake via public records requests because they collected almost nothing– at least compared to what was projected. Burgess used a matrix of lies to claim why he didn’t have to release the figures. I believe he relented earlier this year.

            I may be wrong when I said all the stores closed. There were two gun stores in Seattle, one closed up shop the other still remains but is struggling, probably to close this year.

            The revenue was ostensibly going to pay for gun violence reduction and studies and to the best of my knowledge, the city hasn’t spent a dime of it on that.

            1. Yes, I did hear about that. I believe the NRA lost an appeal regarding that law just recently.

              1. They did. The SC ruled that Seattle can levy a tax on whatever it wants if the revenue is spent for public benefit. Not sure how this is gonna jibe with the income tax.

            2. What really, really puzzles me is that you don’t have to go far in any direction from Seattle to be in a place where you would really, really want to have a gun.

              I grew up in the Puget Sound. Those woods are fucking serious. A .460 mag and a 45-70 Government are essentials. For the fauna and neighbors.

              1. And Bigfoot. So you need a really big gun.

              2. And that is why we have two Cabela’s on the West side of the mountains out where the long arm of King County idiocy can’t reach.

  8. So why didn’t they avoid the total income/net income problem by just applying the tax to true gross income? (I would have presumed there was some constitutional or statutory constraint they were trying to engineer around, but the admission that the ordinance violates existing state constitutional precedents would seem to suggest that they don’t care about that.)

    1. Wondering that too. Maybe gross is also illegal so they are attempting to get at Total Income as a distinct category from Gross and Net?

    2. I wonder if you can’t be taxed on gross because you are allowed lawful deductions for the purpose of limiting your tax liability. Taxing gross would usurp that.

  9. Lawsuits can say anything they want.

    Lawsuits have more freedom of speech than Google employees.

  10. What will Kshama do when all the wealthy people in Seattle move to just outside of town?

    1. Tax them anyway for justice?

      1. These fucks have a perverse sense of justice and are not moral or ethical in the slightest.

    2. She’s fine with that – she’ll just expropriate all their assets. You know she’s a dyed-in-the-wool socialist, she’s argued for not just the usual shit like the $15 an hour minimum wage and rent control and mass transit, but nationalization of industry (she argued that Boeing employees should seize Boeing and start producing light rail cars), seizing rich people’s houses for public housing and crazy shit like that. It’s no wonder at all that she thinks she’s above the law – she knows better than anybody else how to organize society and she has no problem with the idea of her imposing her will on everybody else.

      1. I think we should impose a law tax where politicians are taxed based on the laws they pass.

    3. leaving town tax, vacancy creation tax…

      1. She can come collect it in person from my New Mexico estate.

        1. And if they do, they will be shocked to find that all of your wealth is held in turquoise.

        2. there’s a New Mexico now?

          1. Filled with dastardly New Mexicans who have Lazer limbs to jump any wall, and New Mexican Chiles to produce even spicier adovada.

            1. The New Mexicans are actually the original Mexicans. Don’t tell Kenny’s dad.

          2. “”there’s a New Mexico now?”‘

            Don’t tell Trump, he’ll want to put a wall around it.

      1. Why would they? They can afford it.

    4. Build a wall! (Wait, did someone else say that recently?)

    5. Tout how she was instrumental in solving Seattle’s housing crisis?

  11. Why do people vote for these a-holes?

    1. Because people agree with them.

      1. I hate that you’re correct.

    2. There’s no one else to vote for.

    3. When you’re forced to choose the lesser of two evils, eventually the choices just get more evil.

  12. The Seattle City Councilmembers who voted for the tax acknowledge as much

    Ahem:

    The Seattle City Council unanimously approved an income tax on wealthy residents Monday, a move widely expected to draw a quick legal challenge.

    By ‘the Seattle City Councilmembers who voted” you mean, the entire fucking council?

    1. As a new immigrant to the area, I need you to train me how to hate.

      1. You won’t need training. It’ll come naturally.

        As a recent immigrant though, you’re coming in at a different starting point.

        I’ve watched the place decline over 30 years. You showed up when the massive homeless camps were already here.

        I’d like to say it can only get better, but I suspect it won’t.

  13. Puleeeeeze, can’t we have some Pacific northwest volcanic eruptions? And, Santa, I want some California earthquakes, too.

    We could cleanse the west coast in a matter of hours.

  14. With any luck, California will annex Seattle just before they secede.

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