Olympia council delays decision on income tax

The fate of two income tax proposals continues to hang in limbo after the Olympia City Council postponed a decision to support one or the other.

But that didn’t stop residents from sounding off about the proposals Tuesday night.

A divided council recently asked city staff to crunch numbers and craft a proposal for voters in November that would create the first income tax in Washington.

The proposal was launched in response to an independent but similar petition by a group called Opportunity for Olympia, which will file its signatures with the county this month with a goal of getting the tax on the November ballot.

Both plans would use the proceeds — just less than $3 million a year — to create a college fund available to any graduate of the Olympia School District.

According to the agenda for Tuesday’s meeting, City Manager Steve Hall was expected to recommend that the council forgo its proposed income tax ordinance and instead allow the petition by Opportunity for Olympia to proceed to the November ballot.

The recommendation stems from questions and concerns about administration, tax collection, auditing, enforcement and distribution.

Instead, the council removed that item from the agenda and postponed discussion for a future meeting. City staff still awaits council direction on the next steps to take, said Hall, noting that the agenda item could come before the council July 12, 19 or 26.

Perhaps the biggest obstacle for any proposed income tax is state law. If the tax were to pass at the polls, it would likely face a legal challenge over whether Olympia has the authority to adopt such a tax.

Supporters say that Olympia can lead a challenge against the state’s regressive tax system while simultaneously providing residents with a tool to raise their quality of life. Opponents have criticized the proposal as a slapdash effort that will waste everyone’s time because of the inevitable legal challenge.

Former mayoral candidate Marco Rosaire Rossi, who is volunteering with Opportunity for Olympia, told the council Tuesday night that nearly 8,000 signatures have been gathered so far.

Rossi refuted accusations that an outside group — namely the Economic Opportunity Institute of Seattle — is responsible for using Olympia as a guinea pig for challenging the state’s tax system. The institute provided the petition’s blueprint for the income tax, but local volunteers are leading the signature drive.

“This is something that is rooted in Olympia,” Rossi said Tuesday, calling the tax proposal “an idea whose time has come.”

As a school counselor, Olympia resident Laura Dietz said she works directly with students who truly need scholarship money, while at the same time, she sees existing scholarships go unclaimed.

“There are many scholarship opportunities that students don’t take full advantage of,” she told the council.

Two professors from The Evergreen State College, Savvina Chowdhury and Larry Mosqueda, both advocated for an income tax to help with college costs.

Mosqueda called it a “social investment” that will leave the community better off in the next 10 to 15 years, while Chowdhury said the proposals would break down a barrier for students from poor and working-class households.

“With this initiative, Olympia would be combating inequality,” Chowdhury told the council. “It is in all of our best interests to have a better-educated workforce.”

Some of the opposition to such a tax is coming from the local business community. Jim Haley, president of Thurston First Bank, returned to the council Tuesday with another warning that an income tax would have a detrimental effect on downtown development and the city’s economy.

“A city tax on income will re-ignite the trash talk about downtown that will lead to another long period of economic decay, vacant buildings and declining property values,” he said. “Those that have invested capital, and want to keep investing in the revitalization of Olympia, will back away from future projects.”

Dean Jones, who owns Encore Chocolates and Teas, urged the council to vote against the tax proposal and work to defeat the petition. To address the issue of education, he suggested the city partner with Lacey, Tumwater, Thurston County and even the state for a solution.

“The cost of a legal challenge will be overwhelming,” he said. “I don’t think we can afford the chaos this could cause.”

Contributions

According to the state Public Disclosure Commission, the top donors to the Opportunity for Olympia campaign include:

▪ Nancy Nordhoff, a prominent philanthropist from Whidbey Island, who donated $12,500.

▪ The Olympia Education Association, which donated $2,000.

▪ John Burbank, executive director of the Economic Opportunity Institute, who contributed $1,866.

▪ Washington Teamsters Legislative League, which has donated $2,000, while the Teamsters Local Union 252 has given $500.

▪ Matthew Loschen, a retired Microsoft employee and education advocate from Redmond, donated $1,000.

▪ Simone Boe, an organizer for the Washington Education Association, has given $300.

Background

The Opportunity for Olympia petition began circulating in April. It seeks an annual 1.5 percent tax on any household income in excess of $200,000.

The money would pay the first year of tuition at any community college, or apply an equivalent amount at any public university in the state, for every public high school graduate in Olympia.

In response, Mayor Pro Tem Nathaniel Jones has spearheaded the city’s proposal to create a graduated income tax for households earning more than $25,000 a year.

The move was intended to address legal flaws and inconsistencies in the Opportunity for Olympia petition, such as a lack of enforcement or penalty provisions. Based on the number of signatures gathered so far by the petition, Jones said it’s clear that Olympia voters want a chance to decide on the tax.

On June 14, the council voted 4-3 to change the city’s proposal to an excise tax on unearned income from wealth, such as taxable interest and dividends, for households earning more than $150,000 a year.

This story was originally published June 22, 2016 at 5:35 PM with the headline "Olympia council delays decision on income tax."