Olympia income tax would open Pandora’s box

An income tax test case is brewing in the city of Olympia. On the heels of what many agree is a flawed local income tax petition, the Olympia City Council is drafting its own ordinance to become the first city in Washington to impose an income tax.

The original income tax petition, backed by the Economic Opportunity Institute, would exact a 1.5 percent tax on household income in excess of $200,000 and dedicate the revenue to funding one year of higher education for college-bound Olympia residents.

Multiple inconsistencies and flaws have prompted Olympia’s City Council to pursue its own income tax proposal — one some believe will pass the inevitable legal challenge. The council’s proposal would place a graduated income tax on all households, rather than just those making more than $200,000.

While a broader tax base would potentially mitigate tax revenue volatility, it would not address the problem of taxpayer migration. In Thurston County, some of the wealthiest households live just outside Olympia’s city limits. Nothing would prevent the city’s high earners from joining them.

By proposing its own amended ordinance, the City Council is sending voters the message that a city income tax is feasible, practical and by implication legal. If the council manages to swindle voters into believing that the hefty expenses to implement and enforce a new tax, which the city is totally unequipped to collect, are trivial, only Washington’s Constitution and eight decades of legal precedent would stand in the way.

Olympia is a handpicked test case by income tax backers. City voters supported a 2010 state income tax initiative that failed statewide. Since extensive statewide strategies have repeatedly flopped, this is the first narrow, concentrated attempt to pass a local income tax — purposely provoking a legal challenge that advocates hope will reach the state Supreme Court, which would then overturn decades of precedent and pave the way for a statewide income tax without a constitutional amendment.

Win or lose, such a legal showdown would leave Olympia’s taxpayers footing the bill. If this proposal were truly about paying for higher education for local residents, supporters would have done what every other municipality does when it wants something — pass a new property or other tax levy, or advocate for a shift in current priorities.

In the end, this proposal is not really about Olympia. This is the classic “lipstick on a pig” scheme to advance the long-term goal of fundamentally changing Washington’s tax structure at the expense of the integrity of our state Constitution.

As Washington residents, we need to protect one of our most precious competitive advantages in tax policy: no income tax. In almost every other category our state is very expensive for business owners and wealth producers. The way we keep the welcome mat out for them is by stopping an income tax.

This story was originally published May 26, 2016 at 6:46 PM with the headline "Olympia income tax would open Pandora’s box."