Ka-ching: Court rules Seattle can impose an income tax in stunning decision

by DCG

I am no tax attorney yet I can read the Revised Code of Washington (RCW). From the Washington State Legislature, RCW 36.65.030: “Tax on net income prohibited. A county, city, or city-county shall not levy a tax on net income.”

If this ruling survives the Washington State Supreme Court, I can guarantee you every other city, county – and the state – will follow suit in grabbing more taxpayer dollars.

From MyNorthwest.comThe Washington State Court of Appeals handed down a shocking decision Monday, ruling that the City of Seattle has the legal authority to impose an income tax.

It was roughly two years ago when Seattle City Council unanimously passed an income tax on high earners. But the 2.25 percent tax on total income above $250,000 for individuals, and $500,000 for married couples has yet to be imposed.

A legal battle has ensued ever since, over the fact that Washington is one of the few states that doesn’t impose an income tax. Monday’s ruling called that restriction into question.

The appeals court ruled that while the tax levied against high earners by the City of Seattle is unconstitutional, the city still has the authority to impose an income tax, provided it’s uniform across all tax brackets. Essentially, if Seattle — or any city in Washington — wants an income tax, it would need to be applied evenly across every household, regardless of what they make yearly.

“I was dumbstruck by the way the court reached its decision,” Attorney Matthew Davis told KIRO Radio. Davis represents Michael Kunath, one of the plaintiffs in the case filed against Seattle’s initial proposed income tax.

“The decision itself was not a surprise at all — how the court got to its decision was a big surprise,” he added.

Next, both Davis and the City of Seattle will look to bring the case before the Washington State Supreme Court, each for different reasons. For Davis, the hope is to uphold the ruling stating Seattle’s proposed tax on high earners is unconstitutional, but overturn the appeals court decision allowing Seattle to impose a uniform income tax.

The City is looking for the opposite outcome: For the Supreme Court to overturn the ruling on the high earner tax, and uphold the uniform income tax decision.

“We’re pleased that the Court held the City had the statutory authority to enact an income tax,” the Seattle City Attorney’s Office said in a written statement. “The City has always recognized that ultimately the Washington State Supreme Court is the proper place to overturn the bad precedent holding an income tax is a tax on property. We intend to petition our Washington State Supreme Court for appeal.”

DCG

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