Earlier this week, PLF filed a motion for summary judgment in Shock v. City of Seattle, challenging the constitutionality of Seattle’s decision to impose an income tax on so-called “high earning” residents. The City did this despite multiple decisions from the Washington Supreme Court holding that a targeted income tax violates the Uniformity Clause of the Washington State Constitution, which requires that any tax imposed on property—and income is property—be uniform. Despite several State Supreme Court cases upholding this constitutional ban on discriminatory taxation, the City of Seattle adopted an income tax targeting those who earn “total incomes” in excess of $250,000 per year with a 2.25% tax rate, setting a 0% rate for everyone else.
The City, in a separately filed motion for summary judgment, asks the trial court to overturn 70 years of Supreme Court case law holding income taxes subject to the uniformity requirement. PLF argues that City’s actions are a cynical attack on what the Washington Supreme Court has called the “highest and most important of all requirements applicable to taxation under our system.” Belas v. Kiga (1998). If the City wants to argue for a change in our constitutional system, the proper venue is through the legislature, not the courts.
More cynical is the City’s argument that an individual’s income should not be characterized as personal property, thereby stripping it of a whole host statutory and constitutional protections. Thankfully, the Due Process and Takings Clauses are made of sturdier stuff than that. A court’s power does not include the ability “to eliminate or change established property rights.” Stop the Beach Renourishment v. Fla. Dep’t of Envtl. Prot. (2010). “If a legislature or a court declares that what was once an established right of private property no longer exists, it has taken that property, no less than if the State had physically appropriated it or destroyed its value by regulation.”
Sold as a “wealth tax,” the City’s income tax aims to punish achievement and success, while threatening poor and middle class families who could fall subject to new city, county, and state taxes if Seattle’s actions went unchallenged. Indeed, PLF’s motion argues that the City’s decision to measure “high-earners” by their total income, rather than their actual take-home pay, subjects many middle class families to the “wealth” tax in violation of the Equal Protection Clause
The City’s “high-income” classification fails to advance the various public interests served by the tax ordinance. In fact, the only justification provided in the City’s motion for summary judgment—that the tax targets only those most capable of paying for the City’s affordability crisis—cannot stand up to any degree of scrutiny. Indeed, the City’s classification relies on the central fallacy that “income” equates “wealth.” It does not.
Many closely held companies, like mom-n-pop restaurants, contractors, etc., may generate large amounts of gross income, but, after the costs of doing business are deducted, the owners often take home only a modest amount. Others may work their entire career with the goal of funding their retirement through a sale of a business or other property—such one-time occurrences do not make a person any more “wealthy” than a neighbor who tucked away money for retirement. In reality, great variations exist within a class based only on “total income” alone.