Won: The Washington Court of Appeals rejected Seattle’s income tax.

Washington’s state constitution provides that all taxes must be “uniform upon the same class of property.” The Washington Supreme Court has repeatedly held that income is property and, therefore, the state’s constitution prohibits targeted income taxes. Nonetheless, Seattle’s city council unanimously adopted an income tax that targets the city’s “high-income” residents by imposing a 2.25 percent tax on any individual earning more than $250,000 per year, or married couples earning over $500,000 per year, and an initial rate of 0 percent on everyone else. Sold as a “wealth tax,” the ordinance was a Trojan Horse that threatened the rights of poor and middle class families. By its plain language, the ordinance imposed an income tax on each and every resident of the city. The income bands and tax rates were temporary. Experience shows that, once a source of tax revenue opens, the government will mine it—meaning that every income level would have been exposed to new taxes.

PLF represented Scott Shock, Sally Oljar, Steve Davies, and John Palmer, Seattle residents and taxpayers who sought to invalidate the illegal income tax. They challenged the city’s unilateral actions in violation of the state constitution and laws, which threatened not only the taxpayers’ rights but also the state’s economy, which derives substantial benefits from the constitutional barriers to targeted income taxes. The city council was well-aware that the Washington Supreme Court had repeatedly invalidated graduated income taxes as unconstitutional, but hoped that the court would overturn the characterization of income as property and open the door to more taxes. Ultimately, the Washington Supreme Court did not, leaving in place a lower court ruling invalidating the tax.

What’s At Stake?

  • Seattle enacted its achievement tax without any Legislative grant of authority to impose a tax on income. In fact, the Legislature specifically prohibited all cities and counties from levying a tax on net income. Cities must comply with the state constitution and statutes.
  • The citizens of Washington are entitled to take part in a debate whether to amend the Constitution and whether to change long-standing, statewide tax policy. Seattle’s decision to circumvent the Legislature, and to exclude a majority of Washingtonians, from this debate must be rejected.
  • The City imposed a graduated income tax in purposeful violation of state law as part of a political strategy to create a constitutional controversy—a controversy that threatens to diminish the well-established constitutional protections enjoyed by every citizen of the State.

Case Timeline