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Key Findings

1. Proposition 2 is a city of Spokane ballot measure.  A “Yes” vote would ban Spokane officials from imposing a city income tax, regardless of any possible future changes in state law. A “No” vote would give the Spokane City Council the green light to impose a local income tax.
2. Imposing local income taxes has long been understood to be against state law.
3. However, a surprising July 2019 decision by the Court of Appeals appears to authorize local income taxes.  That decision is expected to be appealed to the state Supreme Court.
4. Meanwhile, some state legislators have proposed legislation to maintain the ban on local income taxes. Other state legislators have introduced bills to allow cities to impose a local income tax.
5. These income tax efforts are occurring even though Washington voters have rejected a state income tax 10 times.
6. Greater Spokane Incorporated, the Washington Department of Commerce and State Treasurer Davidson say having no income tax gives our state an important competitive advantage.

Introduction

This November, voters in the city of Spokane will consider ballot measure Proposition 2, a charter amendment that would prohibit city officials from imposing a local income tax. The Washington Policy Center has long recommended avoiding the imposition of an income tax. 

Even though imposing local income taxes has historically been understood to be against state law, local officials in at least one city (Seattle) have tried to impose an income tax illegally in hopes of getting a court ruling that would allow it. This has resulted in a lawsuit by citizens seeking to protect themselves from illegal taxation. 

A surprising July 2019 decision by the Court of Appeals appears to have opened the door to some type of local income tax. That decision is now expected to be appealed to the state Supreme Court with a possible ruling in the near future. Some state legislators are also now proposing statewide legislation to prohibit local income taxes in response to the ruling.

Other state legislators, however, have introduced bills attempting to give local governments the authority to impose local income taxes. These income tax efforts are occurring even though statewide voters have rejected ten straight income tax ballot measures. In 2016, voters in Olympia also rejected a local income tax. 

Despite any future changes by the courts or by the legislature to the local income tax ban, Initiative No. 2019-2 if passed, would ensure that no local income tax could be imposed in Spokane. 

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