State lawmakers who oppose an income tax and believe taxes should be approved through legislative or voter approval have yet another chance to make their case during the legislative special session.
State Rep. Brandon Vick (R-18) this week proposed legislation to clarify a 1984 state law banning local governments from passing income taxes in response to efforts by several cities to do just that. Activists and local lawmakers who support the tax proposals hope the move will trigger a court challenge that ultimately results in the State Supreme Court overturning previous court rulings defining income as property under the State Constitution, allowing for a statewide progressive income tax.
Income Tax Proposals Face Big Legal Hurdles
Following announcements earlier this year by a group to “Trump-Proof Seattle” with a tax on high-earners, the Seattle City Council recently announced its intent to pass a progressive income tax. Port Townsend has also expressed interest in doing the same.
However, the proposals face seemingly insurmountable legal obstacles. Not only do local governments require legislative authority to impose a specific tax, but also current state law explicitly prohibits them from approving a “tax on net income.”
It was the same argument the State Court of Appeals used in their ruling against Olympia Measure 1, which would have also imposed a local progressive income tax. The ruling was stayed for the November election by an appeals court commissioner, where the measure was solidly defeated 55-45 percent.
The Seattle resolution seems to acknowledge this challenge, declaring that the city “can pioneer a legal pathway and build political momentum to enable the State of Washington and other local municipalities to put in place progressive tax systems.” One possibility is by labeling it a tax on “gross income,” rather than net. The Transit Riders Union – the group behind “Trump-Proof Seattle” – called its proposal a tax on “unearned” incomes.
War Over Words Intensifies Tax Battle
The semantic maneuvering may seem farfetched, but fear that it may placate the state’s high court was enough for Vick to introduce HB 2221. He told Lens it would eliminate any possible ambiguity about the legislature’s intent. The bill adds specificity to the tax prohibition and declares that “the definition of income specifically, are to be construed broadly” by any court reviewing it.
While the legislation shouldn’t even be necessary, “a lot of judges who are supposed to be impartial and non-biased” aren’t, said Vick.
The bill has been referred to House Finance, but no public hearing is scheduled yet. A companion bill in the Senate is expected to be introduced by State Sen. Phil Fortunato (R-31), who also sponsored a proposed constitutional amendment this session prohibiting all forms of income tax at both the state and local level.
While Fortunato’s proposed amendment failed to gain the two-thirds majority necessary to clear the Senate, Vick anticipates far less pushback on his new bill from colleagues in either chamber.
“I think this has legs,” he said. “Working with the Democrats is something I’m absolutely open to doing on this.” However, Fortunato told Lens he’s not giving up hope. “I anticipate them being as crazy as they were” in how they voted on his resolution.
Contending With Perception Of High Court
Although the push to challenge the state’s progressive income tax ban is originating from a local level, lawmakers such as Fortunato say the issue would be moot if activists lacked sympathetic justices.
“They just feel that the Supreme Court is on their side this time, and that’s why they’re anxious to do it,” Fortunato said. “You got to admit; some of their (Supreme Court) rulings – we’re scrambling to deal with the Hirst decision. These courts are creating all sorts of havoc over stupid stuff.”
A progressive income tax was first declared unconstitutional by the State Supreme Court in the 1930s. However, in the 1951 Power, Inc. v. Huntley decision, the court majority wrote that “it is no longer subject to question in this court that income is property.” Under the State Constitution, tax on property must be uniform and no greater than one percent.
Though Washington voters approved a statewide progressive income tax in the 1930s, since then they have rejected other such proposals numerous times.
Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, told Lens that it’s time to “stop playing these games” that seek to circumvent the will of voters on the issue.
“This is a matter of the city saying ‘We want an income tax and the voters won’t pass an income tax…so we think that if we can set up a lawsuit, we can pass something that we know is illegal'” but the court will rule in their favor, he added.
Vick said: “This is the description of undemocratic. Your (cities) not going to your legislators to get the law changed. Even the governor has kind of come out and said income tax isn’t the right thing for Washington state right now. I think it’s…time for introspection.”