Two years after the city of Olympia went to court to stop a local ballot initiative that would have created the state’s first income tax, the city is on record supporting Seattle’s effort to do so.
But Olympia’s city attorney says the legal issues are different, and its support this time around is not a sign Olympia is ready to try for a local income tax just yet.
“The issue here is more one (of) ‘Does Seattle as a municipality have the authority under state law within its juridical boundaries to impose this type of tax?’” said Mark Barber, who authored the amicus brief filed jointly with the Association of Washington Cities, Port Townsend and Port Angeles. “The answer I think without a doubt is yes.”
Barber was acting under the direction of the City Council, which in August passed a resolution calling for “fairness and equity” in state and local taxes.
In 2016, an Olympia household earning $25,000 a year paid about 13 percent of its income in state and local taxes, while a household earning $250,000 paid less than 4 percent, according to the resolution.
A report this month from the Institute on Taxation and Economic Policy said Washington has the most regressive tax structure in the country, thanks to its lack of a personal income tax and comparatively high sales taxes.
Last year, the Seattle City Council approved a 2.25 percent tax on total income above $250,000 for individuals or $500,000 for married couples. A group of residents sued, and a King County Superior Court judge ruled the city didn’t have permission from state lawmakers to do such a tax, which he said violated the state’s ban on taxes on net income.
Seattle has asked Washington’s Supreme Court to hear its appeal.
The amicus brief, which was filed Oct. 17, argues local legislative bodies — in this case, the Seattle City Council — have the authority to impose taxes without permission from state lawmakers. Barber said the issue was framed narrowly so that AWC, which lobbies on behalf of all Washington cities and towns, could sign on.
Jason Mercier, government reform director for the conservative Washington Policy Center, said it is ironic to see Olympia’s name on the brief given its opposition to a local income tax proposal in 2016.
Back then, a group called Opportunity for Olympia filed a ballot initiative that would have taxed household incomes over $200,000 at 1.5 percent, with the money raised going to a public college tuition fund. The City Council opposed the measure, fearing a costly legal challenge if it passed, and the city went to court to try to keep it off the ballot.
In court documents, the city argued state law prohibits cities from taxing net income and that the tax question was beyond the scope of local initiative power.
“They were right in 2016,” Mercier said.
The measure remained on the ballot, and about 52 percent voted “no.” Olympia Mayor Cheryl Selby said this week the results showed Olympia shouldn’t be a test case for income tax in Washington.
Which brings us back to Seattle’s case. Selby said while she supports the idea of a statewide income tax, it is too soon to say if a local version is in the cards for Olympia if Seattle prevails at the Supreme Court.
“That’s a lot of ifs. I’m not ready to comment on that. There’s a lot of uncertainty on this,” she said. “But anything that can raise awareness on the regressivity of our taxes, I’m happy with that.”