The City of Seattle's Income Tax on Higher Brackets
Game-Changing Government Policies & Drivers
By William Hillis
Broker & Research Editor, Realogics Sotheby's International Realty
"Self-interest is likely to prevail among King County's many current and aspiring high wage-earners."
The 2.25-percent income tax unanimously enacted by the Seattle City Council to be levied on top income earners needs first to survive several lawsuits, including one brought on behalf of five residents by former State AG Rob McKenna. According to a brief by the City of Olympia in the face of last year’s Initiative 1 enacting a local income tax there, the Council’s act conflicts with a state law prohibition against local governments taxing net income. (Nearly 55 percent of Olympia voters rejected Initiative 1.) In another case last May, the Washington Division I Court of Appeals said, “Municipalities must have express legislative authority to levy taxes." That the Legislature has not repealed its prohibition against income taxes implies that the Council’s tax cannot stand.
Recent decades have brought cultural shifts to the Puget Sound region, attributable to the transition from a heavy industrial and resource-based economy to software and services; increasing immigration, domestic as well as international; and the same growing income disparities seen throughout the Western world. Despite its colorful early 20th century flirtations with the socialist Wobblies, Puget Sound remained a centrist liberal bastion for nearly a century. Now the gap appears to be widening between Seattle’s neoliberal Brahmins and high-profile activists on the left who are committed to redistribution. The Council’s vote was a victory for the latter group. Their influence is strongest in the city; elsewhere, self-interest is likely to prevail among King County’s many current and aspiring high wage-earners.
Canada is not immune to the war on wealth: in September 2017, a Vancouver city council candidate proposed a “mansion tax” of an extra one percent from homes assessed at or above Can$5 million, and two percent from homes assessed at or above Can$10 million.
Impact: Seattle's income tax will be voided by the courts. No change to the State's reliance on sales and property tax is on the horizon.