August 31, 2017

Seattle’s tax on achievement is a Trojan Horse that threatens the poor and middle class

By Brian T. Hodges Senior Attorney

One of the things that makes Washington’s legal landscape so unique is that the state constitution was drafted by people who, having just witnessed the Civil War, were wary of state and federal government. As a result, our constitution provides many protections rarely found elsewhere in the country, such as a provision prohibiting the government from targeting political minorities to bear uneven tax burdens. Specifically, Article VII, Section I of the Washington State Constitution states that “all taxes shall be uniform upon the same class of property … The word ‘property’ as used herein shall mean and include everything, whether tangible or intangible, subject to ownership.”

For nearly a century, the Washington’s Supreme Court has repeatedly held that income is property and, therefore, the constitution prohibits targeted income taxes. And all attempts to change this constitutional provision through the courts, legislature, and via popular initiative have failed. Indeed, our state’s top-to-bottom economy has benefitted from this constitutional barrier to targeted income taxes, attracting large and high-paying employers.

Despite this long history, last month, the City of Seattle 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, and an initial rate of 0 percent on everyone else.

Sold as a “wealth tax,” the City’s ordinance is a Trojan Horse that threatens the rights of poor and middle class families. By its plain language, the ordinance imposes an income tax on each and every resident of the city. The income bands and tax rates are temporary. Experience shows that, once a source of tax revenue opens, the government will mine it—meaning that every income level is now exposed to new taxes. Indeed, if Seattle is successful, it will open the doors to income banded taxation at the city, county, and state level, without limitation.

The City, however, sowed the seeds of class war as part of a cynical attempt to gain populist support for its strategy to use the courts to force a change to the law that the people of Washington have opposed for the past century. The City was well-aware that the Washington Supreme Court had repeatedly invalidated graduated income taxes as unconstitutional, but hopes that the current court will overturn the characterization of income as property and open the door to more taxes.

In a complaint filed early today, PLF argues that the City’s strategy itself violates the U.S. and Washington Constitutions, which do not permit the courts to do the legislature’s work. First, the Court lacks the authority to amend the Constitution’s plain command that a tax on property must be uniform. Second, the fact that income constitutes property subject to the protections guaranteed by the State and Federal Constitutions is well-settled in Washington. Thus, any challenge to the character of income as property must be brought to the Legislature because 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).

This case is not about “rich versus poor” as the City would have everyone believe. It is about protecting well-settled constitutional—and that’s a fight for everyone.

 

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Kunath v. City of Seattle

The Washington State Constitution prohibits the government from levying an income tax on targeted segments of the population; any income tax must be uniformly applied to all citizens. Nonetheless, Seattle enacted an income tax targeting those making in excess of $250,000 per year with a 2.25% tax rate, setting a 0% rate for everyone else. Promoted as a “wealth tax,” the City’s income tax punishes achievement and success, while threatening poor and middle class families who could later fall subject to new city, county, and state taxes if Seattle’s gambit succeeds. PLF represents Seattle residents in a lawsuit challenging the city’s knowing violation of the state constitution.

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