Earlier this afternoon, King County Superior Court Judge John Ruhl issued a ruling against Seattle’s proposed income tax, queuing up a likely appeal that would take the case to the Court of Appeals and then the Washington state Supreme Court.
In his ruling, Ruhl argued that, despite statutes giving cities and counties authority to levy taxes, they can only do so if given express permission by the state legislature, citing past Supreme Court cases. “’We have consistently held that municipalities must have express authority, either constitutional or legislative, to levy taxes’,” reads a statement from a 1984 Supreme Court ruling that was included in the judgement.
Additionally, Ruhl pushed back on an argument put forward by the defendants—the City of Seattle and the Economic Opportunity Institute (a left-leaning local think tank that lobbied heavily for the City’s income tax ordinance)—that the City’s income tax is, in fact, an excise tax, and that statutes give cities the authority to impose taxes for the privilege of doing business in the city. “Although [statutory law] grants the City broad authority to impose excise taxes on businesses for the privilege of doing business within city limits … the City’s right to impose excise taxes under that statute may be levied only ‘upon the right to do business, not upon the right to exist’,” the judgement reads.
In pithy rebuttal, the judgement added: “In short, the City’s tax, which is labeled, ‘Income Tax,’ is exactly that. It cannot be restyled as an ‘excise tax’ on the alternate ‘privileges’ of receiving revenues in Seattle or choosing to live in Seattle.”
Ruhl also shot down the City’s argument that the income tax taxes “total [gross] income” as opposed to “net income” (which is outlawed by statuary law), assessing that the City’s usage of the term “total income” includes net proceeds and, as such, is “net income.”
Proponents of the tax (including the City of Seattle) have been banking on getting the issue before the state Supreme Court from the get-go, hoping to create legal precedent establishing income taxes not just in Seattle, but in other cities and across the state. (Shortly after the Seattle City Council and former Seattle Mayor Ed Murray passed an income tax ordinance last summer, numerous lawsuits were filed against the tax.) The City’s legal team was fully expecting the case to get appealed by either side prior to last week’s court hearing and today’s ruling.
Shortly after the ruling was issued, outgoing Mayor Tim Burgess and City Attorney Pete Holmes issued a joint statement decrying Washington’s regressive tax system. “In order to build a more just and equitable society for all, we need a serious overhaul of our state’s tax structure. We know some argue against any income taxes at all, but we would point out that we already have a corporate income tax in this state—through the business and occupation tax. But we need more progressive tax sources, not fewer. The Seattle income tax was an attempt to move toward this goal, and we are hopeful that it will be upheld on appeal,” they said.
A press release from the Freedom Foundation—an Olympia-based free-market think tank—touted the ruling as the first illustration of the illegality of Seattle’s income tax and condemned the City’s likely efforts to appeal the ruling. “The whole idea is to punish those who’ve been successful by confiscating their wealth and giving it to the perceived victims of that success,” Freedom Foundation CEO Tom Mccabe said.
McCabe added that Seattle City Council members “understood full well the flaws in their tax scheme but passed it anyway hoping an activist lower court judge or, ultimately, the Supreme Court justices would agree to substitute their liberal agenda for the law.”
Seattle Weekly has a call out to the City’s legal team to get a response to today’s ruling.