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The state Supreme Court today refused to hear the Seattle income tax case allowing the Appeals Court's ruling to stand. While this is fantastic news concerning the state’s constitutional ban on a graduated income tax, it means the Appeals Court's bizarre decision to invalidate state law banning a local income tax remains in effect. Earlier this year majority Democrats in the legislature refused to hear bi-partisan bills that would have re-instated that 36 year old law.
Make no mistake though, this is a major decision and devastating blow to those who have been trying to circumvent voters and get the courts to allow a graduated income tax without a constitutional amendment. It also means extra vigilance will be needed now on efforts to impose a capital gains income tax.
Public records recently received confirmed that lawmakers’ motivations for adopting a capital gains income tax is to try to do what Seattle did by setting up a lawsuit in hopes the courts will change their mind.
Consider the following 2018 email from Sen. Jamie Pedersen (page 1 of pdf):
“But the more important benefit of passing a capital gains tax is on the legal side, from my perspective. The other side will challenge it as an unconstitutional property tax. This will give the Supreme Court the opportunity to revisit its bad decisions from 1934 and 1951 that income is property and will make it possible, if we succeed, to enact a progressive income tax with a simple majority vote.”
There never should have been any doubt that today’s court decision would be coming. The state Supreme Court has consistently ruled that income is property and that graduated income tax supporters need to pursue a constitutional amendment.
With the legislature refusing to act on the bills this session to reimpose the local income tax ban, however, it will be more important than ever for local officials to follow the lead of Spokane, Spokane Valley, and Granger in adopting local income tax prohibitions.
On balance though, today’s decision is fantastic news and will help to maintain Washington’s competitive advantage of no income taxes.
Additional Information
Lawmaker’s emails confirm goal for capital gains proposal is broad income tax
Income tax advocates reminded how to properly amend state constitution
Time running out for lawmakers to act on bipartisan proposal to reaffirm local income tax ban
