Seattle

Seattle's Income Tax Ruled Illegal

The city council's desire to 'tax the rich' collided with the plain text of Washington state law.

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Monopoly luxury tax
Ken Teegardin/Flickr

Seattle's illegal income tax has been ruled, well, illegal.

King County Superior Court Judge John Ruhl, in a summary judgement, sided with many angry city residents who contended the local income tax violated state law. Ruhl rejected a wide range of arguments cooked up by Seattle to save its legally dubious levy.

The ruling "is a victory for all taxpayers in Seattle and throughout the state, and for everyone who values the rule of law," said Brian T. Hodges, a senior attorney with Pacific Legal Foundation who represented several Seattle residents in challenging the tax.

Seattle's progressive income tax, passed unanimously by the City Council in June, levied a 2.25 percent rate on individual incomes above $240,000 or $500,000 for joint filers.

The tax proved immediately and wildly unpopular. Three State Supreme Court decisions have called the progressive income tax a violation of Washington's state constitution. A 1984 state law reinforced those rulings, flatly saying "a county, city, or city-county shall not levy a tax on net income."

Getting around the plain text of the law required some creativity. The council defended its ordinance as a tax on "total income"—as defined on various IRS tax forms. Ruhl decided the IRS's "total income" figure incorporates various deductions and write-offs, making it in fact a measure of "net income."

Seattle also tried to argue that their ordinance—whose own text describes itself as "imposing an income tax"—was not an income tax at all, but rather an excise tax. The distinction is that an excise tax is levied "on a taxpayer for voluntarily exercising a certain right or privilege."

Living and earning a wage, according to Seattle's legal team, is a privilege that residents choose to exercise, and thus can be taxed. Paul Lawrence, an attorney for Pacifica Law hired by Seattle to defend the tax, made this point rather succinctly, saying "if they don't like the tax consequences that Seattle has chosen to do an income tax, they can move to Bellevue." (Bellevue is a suburb of Seattle that does not have an illegal income tax.)

Progressive Seattle, in effect, adopted the "love it or leave it" argument much beloved by patriotic conservatives. Ironic given that council member Kshama Sawant, co-sponsor of the ordinance, has repeatedly referred to housing as a human right. One of the stated purposes of Seattle's income tax was to fund more affordable housing.

So, living in Seattle is a privilege, but living in publicly-funded affordable housing in Seattle is a human right. Yeah, right.

Unsurprisingly this argument failed as well. Several constitutional questions were raised by both Seattle and the plaintiffs, but Ruhl declined to rule on those.

In a statement following the ruling, Seattle Mayor Tim Burgess and City Attorney Pete Holmes promised to appeal the ruling to the Washington Supreme Court, saying new progressive sources of income were necessary to correct for the state's "misguided over-reliance on regressive sales taxes."

When still a city councilman, Burgess sponsored Seattle's now-passed, regressive soda tax.

State and local income tax initiatives have been consistently rejected by Washington voters. The last state-wide income tax proposal was voted down by some 64 percent of voters.

Said David Dewhirst of the Freedom Foundation in a press release, "voters have consistently rejected income taxes of all kinds. So they're [Seattle] trying a shortcut by asking the courts to legislate from the bench." Dewhirst participated in the litigation against Seattle's income tax.

Whether the Washington Supreme Court will uphold Seattle's income tax remains to be seen. In the meantime, Seattle residents can continue to enjoy the supposed privilege of living in a income tax-free city.

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  1. A 1984 state law reinforced those rulings, flatly saying “a county, city, or city-county shall not levy a tax on net income.” Getting around the plain text of the law required some creativity. The council defended its ordinance as a tax on “total income”?as defined on various IRS tax forms. Ruhl decided the IRS’s “total income” figure incorporates various deductions and write-offs, making it in fact a measure of “net income.”

    1) “Oh, very well. We’re taxing *gross income*.”

    2) “Obviously, ‘net income’ refers only to commercial fishermen and professional insect collectors.”

    1. It’s an open-secret that the god damned Lefties are always in the pocket of Big Entomology.

      1. They do eat a lot of bugs…

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    2. Gross income is defined as money we find icky.

      1. Which is further defined as money they can’t get their hooks into.

      2. Basically anything over $15/hr, because, “you didn’t build that…”

    3. It worked for Obamacare…

      Day 1 “It’s not a tax”

      Day 2 “We’re going to implement it as a tax”

      1. Let’s not forget that it was Justice Roberts who decided that “tax” and “fee” both have three letters, so, you know, close enough.

  2. I guess the Seattle Council got too big…

    [dons sunglasses]

    …for their Britches.

      1. I guess

        [dons reading glasses]

        Fist doesn’t approve of our

        [dons sunglasses]

        posting style.

        1. I’m just trying to keep you from making fools of yourselves.

          1. [dons monocle, stares at Fist]

          2. Why is everyone always stealing Don’s stuff?

            1. You know who else stole stuff?

            2. Its not stealing. It’s Asset Forfetutre. Please.

              Don should have thought twice about proposing his Colonel Klink fantasy to that undercover cop posing as a meth hooker.

              1. Gaah, forfeiture, Forfeiture! $&%&+! Auto-correct!

  3. Living and earning a wage, according to Seattle’s legal team, is a privilege that residents choose to exercise

    A choice which the City of Seattle would like to thoroughly discourage.

    1. Living and earning a wage, according to Seattle’s legal team, is a privilege that residents choose to exercise, and thus can be taxed.

      What happens if residents want to exercise the privilege of breathing?

  4. “The tax proved immediately and wildly unpopular.”

    I’d like to see the stats for that. After all, this is Progland we’re talking about. They’re practically Canadian.

    “Seattle’s progressive income tax, passed unanimously by the City Council in June, levied a 2.25 percent rate on individual incomes above $240,000 or $500,000 for joint filers.”

    I’m sure the tax was unpopular with people who earn more more than $240,000 a year.

    If it was “wildly unpopular” with people who make less than $240,000 a year, then that might represent a sea change in progressive thinking.

    I’d like to think it means that progressives only want high taxes on other people (H/T to Maggie T), but if this tax on the wealthy was “wildly unpopular” with people making less than $240,000 a year, then that wouldn’t explain this tax’s wild unpopularity at all. Quite the opposite.

    P.S. I suspect the tax isn’t unpopular with average people in Seattle.

    1. It’s pretty unpopular statewide, as this is feared to be a precursor to a state income tax. Considering that this is an incredibly important selling point to living here (And considering they tax quite a bit via other means), this would be a big hit to the state.

      Also, this is one of those cities where the tax is probably quite popular with those who make that much money. They tend to be pretty progressive minded in that city.

      I look forward to everyone moving away and Seattle being stuck with itself though.

      1. So is their progressivism all about culture war issues?

        A flannel cultural identity like the Irish in Boston?

        Flannel, Democrats, and Rainier beer?

        1. Yes. I was at a Thanksgiving in Seattle one time, they did the “everyone say a thing you are thankful for” bit, and one guy’s thankful item was that he’s better informed than people who watch “Faux News”.

          1. See…it just does not fucking stop with these people

            1. Remember when sports and weather were the safe topics of conversation?

      2. Yes, $240K today, $150K tomorrow, $75K next year.

        1. Even if they don’t lower the threshold. Inflation will eventually work the tax downstream.

    2. The average annual pay in Seattle is $67,294.00. The average. I’d say this is a case of ‘someone else was going to pay that rate, not me’ type of issue.

  5. sided with many angry city residents who contended the local income tax violated state law.

    To which three non-voting residents are you referring?

    1. Seattle’s city council is made up of seven Democrats and one who was elected running as a nominee of Socialist Alternative (Trotskyist).

      That makes it hard for them. When the city council enacts a wildly unpopular tax, what are the voters supposed to do. Obviously, they can’t vote for Republicans. Because that’s . . . um . . . well, obviously . . .

      It’s unposssible!

      So, they’ve got lawsuits or prayer, not that anyone should be allowed to pray on public property.

      1. A neutron bimb would get rid of all the progtards, and after a waiting period for the radiation to disapate, Seattle could be repopulate with with non communists.

        Everybody wins!

        1. Perhaps I should market a line of ‘Nuke Seattle’ t-shirts. They should be very popular in a Spokane.

  6. I love it when progs get taxed then all hell breaks loose.

  7. Progressive Seattle, in effect, adopted the “love it or leave it” argument much beloved by patriotic conservatives.

    I have no idea what this “patriotic conservative” b.s. refers to.

    But I have no problem with Seattle adopting a massive income tax; they can serve as an object lesson in the consequences of such a policy.

    1. Yes, you have an idea, even if you think it’s wrong or unfair.

    2. It is an obligatory “rage against conservatives” line, even if it makes little sense.

      The Left has always has that attityde about taxes, it is perfectly in line with their contention that the “social contract” legitimizes any abuse of the citizenry.

    3. I’ve been told “why don’t you move?” or “you can just leave” when arguing about taxes.

      It’s that awkward moment when 21st century progressives sound like 1960s reactionaries.

      1. Nah, its kinda like the N-word. Black progressive town council members can say it, and look hip. White John Birch retirees can say it, and look, well, awkward.

        1. hmmm let’s test this shall we?…nigga, nigga, nigga, nigga, nigga…something is wrong with your hypothesis, I don’t feel awkward at all…

    4. I kind of like the idea that they tried to codify the idea that a job is a privilege and not a right.

      Cause that wasn’t going to come back to haunt them.

    5. Conservatives say “Love it or leave it”

      Liberals say “Love it or we’ll fucking kill you for trying to escape”

  8. This was always a clear loser, even in Washington.

    1. Seattle is often held back by the state Constitution. They’d have banned guns years ago had it not been for the state umbrella protections.

      1. If any state needs umbrella protections, it’s Washington.

    2. sooo…Washington is a clear loser? I concur east coast or west coast!

  9. Two important points I have been making about the US INDIVIDUAL INCOME TAX are confirmed in this article-yet no one wants to connect the dots!
    1. I have pointed out numerous times on my blog http://www.nontaxpayersforronpaul.blogspot.com that State income taxes are not actually levied by the particular state, but in fact are piggybacked on the federal income tax system. Therefore, only those who are subject to the federal income tax are required to pay a state income tax.
    2. The income tax is an excise tax. It is not some un-apportioned direct tax created by the Sixteenth Amendment. Your pay from an occupation of common right that is not paid from the US Treasury or its agencies and instrumentalities is not directly taxable.
    3. The Federal and in this case local government tries to eliminate the distinction between a right and a privilege. This is the weakest argument . It is not backed up by Supreme Court decisions or any other authority, it is simply asserted. This is where libertarians absolutely have the high ground-earning a living in the ordinary occupations of life is a right, not a privilege.
    This is why my friend Pete Hendrickson has indeed “Cracked the Code” and why tens or hundreds of thousands of ordinary Americans are receiving full refunds of all withheld federal and state income tax withholdings for close to fifteen years. http://www.losthorizons.com

    1. How’d that “fuck off slaver, not paying taxes” thing work out for Wesley Snipes?

      1. Nevertheless, always bet on black.

      2. He got the Libertarian Party megabucks worth of column inches in the looter press. We should see if he’ll run for office on the LP platform. The deadline for candidate registration is already ticking…

    2. Absolutely.
      Voting is a right. Anything that inconveniences a potential registrant is unconstitutional, say requiring photo id.
      Keeping and bearing arms is a privilege. Anything can be done to infringe on that privilege. Requiring applications with large fees that can be denied for any reason without appeal. Requiring classes be taken and paid for even by trained instructors in the subject matter. Outlawing arms because of how they look. Any old thing, because it is not a right, it is a privilege subject to common sense regulation.

    3. Believe what you want, just don’t be surprised when they show up to arrest you.

  10. “Living and earning a wage, according to Seattle’s legal team, is a privilege that residents choose to exercise, and thus can be taxed.”

    Mm-kay. So in the minds of pinko Seattle dwellers, those elitists who have “jobs” and make “money” are just behaving like selfish, anti-social oppressors, and should be discouraged by righteous tax officials, on behalf of more compassionate communal slackers.

    1. This is why we need a civil war…….to thin the ranks of these treasonous turds.

      1. can we do this without the war part? every one just go out & kill one of these slack jawed asshats…not like they carry guns right…

  11. Drat! There went another wonderful idea pushed by Hillory Clinton, Al Franken, Bernie Whatzisface and William Jennings Bryan. That’s a shame. But there is nothing stopping those altruists from donating a Caddie or two to the morons in Seattle who elected that former city council.

  12. Paul Lawrence, an attorney for Pacifica Law hired by Seattle to defend the tax, made this point rather succinctly, saying “if they don’t like the tax consequences that Seattle has chosen to do an income tax, they can move to Bellevue.” (Bellevue is a suburb of Seattle that does not have an illegal income tax.)

    .
    Which obviously brings this old gem to mind.

  13. WA and Seattle residents might look to CT for a learning experience. Good’ole Governor Lowell Weiker imposed an income tax on us, saying a state can’t exist on sales tax alone. Never really got into the regressive argument. The progressive trend toward never ending tax increases has put CT in the spotlight for being run by incompetence. I left in 2007.

  14. Hmm… Sometimes I think I’d rather have a ban on property tax. I can see plenty of arguments why an income tax is superior to a property tax.

    Of course, to impose BOTH types of tax at the same time is unconscionable.

  15. They should have done what Louisville, KY does. Simply label the income tax an occupational license fee that just happens to be tied to how much a person earns when working in Louisville. It’s a sham that has been successfully upheld in the courts for many, many years now for exactly the same reasons Seattle is giving … the city “needs” more money.

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