Seattle makes “long shot” appeal on income tax

Seattle makes “long shot” appeal on income tax
The city of Seattle has filed a motion to appeal a King County Superior Court ruling against its income tax and is asking for direct review by the State Supreme Court. Photo: bakkencpapc.com

The city of Seattle is moving forward with its “long shot” appeal to the King County Superior Court ruling on its income tax ordinance. They’re seeking a review of it by the State Supreme Court, which recently struck down a tax exemption passed by the city of Spokane for lacking statutory authority. It’s the same argument Judge John Ruhl used in his Nov. 22 decision against Seattle and the progressive think tank Economy Opportunity Institute (EOI).

The Dec. 8 motion for appeal was filed just after the State Supreme Court issued a ruling against Spokane that adds further doubt to any possibility the justices will side with Seattle. Many observers noted that it might have provided Mayor Jenny Durkan with the political cover to drop any appeal. In a Facebook live interview with the Seattle Times, she called the appeal a “long shot”, but said they should file one, anyway.

Continuing further with the lawsuit is a waste of everyone’s time and money, says the Opportunity for ALL coalition, which is funding the legal challenge. On Twitter, they wrote “The city should cease wasting hundreds of thousands of taxpayer dollars on a tax that is clearly unconstitutional.” In another Twitter post, the organization wrote: “We will continue to make our case that there is a better way – one that preserves and protects our city’s and state’s incredible economic ecosystems and creates opportunity for all.”

Also challenging the city ordinance is the Freedom Foundation, a conservative think tank.

Parties to a lawsuit can appeal for direct review by the high court for various reasons. The city is expected to argue that theirs is a case “involving a fundamental and urgent issue of broad public import which requires prompt and ultimate determination.”

However, the case may not be heard by the high court at all due to the nuance of Ruhl’s decision. In Washington state, the legality of city tax ordinances is scrutinized via a two-tier process because municipalities have no de facto authority to pass a tax; they must be authorized to do so by the state legislature. That taxing authority delegated from the legislature must also not violate the State Constitution. In its ruling against Spokane, the Supreme Court concluded that while the legislature can pass property tax exemptions, cities lack that express authority.

Many progressive income tax advocates have hoped the legal challenge would enable the Supreme Court the opportunity to overturn an 80-year legal precedent treating income as property under the constitution’s uniformity clause regarding property taxes.

Yet, that question was not addressed by Ruhl, who invalidated it solely based on a 1984 state law explicitly prohibiting local income tax. This means that Seattle’s appeal can only address that argument, and the only part of the income tax debate that will be considered by the Appeals Court and, if they side against the city, ultimately the State Supreme Court if they choose to let the lower court’s decision stand.

Also, Ruhl could still approve sanctions against Seattle and EOI filed by plaintiff Michael Kunath for making “frivolous arguments” in court. Kunath is requesting the court review a 2015 legal brief provided to the City Council by City Attorney Peter Holmes, who has remained uninvolved in the legal challenge.

Aside from the tax’s legality, critics have also taken aim at its negative impact on renters and homeowners. It’s what prompted the Rental Housing Association of Washington and plaintiff Dorothy Sale to challenge the city ordinance.

In particular, the tax would harm middle class elderly residents who purchased their homes decades ago at far lower prices but would be subject to the tax when they go to sell and use that money for retirement, Opportunity For ALL argues:

“Dorothy Sale bought her home in Ravenna in 1967 for $18,500, and has lived there and paid property taxes for the last 50 years. Now 98, Dorothy retired from her job at the University of Washington in 1983. Living on a state pension and limited social security, she currently qualifies for reduced property taxes as a low-income property owner. Dorothy may need to rely on the money she earns from the sale of her home if she requires assisted living or nursing care in the future. She opposes taxing the real estate gains of Seattle residents of modest means who have lived in their homes for decades.”

The city now has 30 days from Dec. 8 to deliver to the appellate court clerk a list of pleadings for the court to consider. Within two weeks, the city must provide an argument for why its case should receive direct review from the State Supreme Court. Opportunity for ALL will be given for them to file a brief and allow the plaintiffs to file responses. A court date will then be set for an oral argument.

However, a final decision won’t be coming anytime soon, with the earliest possible date sometime in July 2018.

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