AWC defends Seattle’s income tax

AWC defends Seattle’s income tax
A brief filed by the Association of Washington Cities as part of an ongoing legal battle over the city of Seattle’s income tax ordinance seeks to defend “home rule” for municipalities as articulated in a 1967 state law. Created by Macrovector - Freepik.com

In a surprise move, the Association of Washington Cities (AWC) has filed an amicus brief to the State Supreme Court in defense of the city of Seattle’s income tax ordinance that was previously struck down in King County Superior Court. Though AWC says the brief only addresses one aspect of the case defending local jurisdiction’s taxing authority, their argument focuses on whether a state prohibition on local income taxes such as Seattle’s exists.

The AWC’s Oct. 17 brief defends the issue of “home rule,” which the association believes was undermined by the King County Superior Court ruling last November. AWC represents all 281 cities in the state.

Under Article 7, section 9 and Article 11, section 12 of the Washington State Constitution, the legislature is authorized to give local governments the power to enact taxes for local purposes.

In his decision last year, King County Superior Court Judge John Ruhl concluded that the Seattle income tax ordinance was illegal because of a 1984 state law specifically prohibiting local income tax.

Although the plaintiffs requested the ordinance be struck down on constitutional grounds, Ruhl concluded “it is unnecessary for the court to reach this issue because the court has determined that the Ordinance is invalid on statutory grounds.”

Yet, the AWC’s brief argues that no such prohibition exists. “The only constraints should be where the Legislature has preempted tax authority or where a municipality seeks to tax governmental activities of another municipality and triggers issues of governmental immunity. Neither circumstance is present in this case.”

The brief argues that a 1967 state law known as the Optional Municipal Code grants cities broad authority when it comes to taxation. “The Legislature clearly expressed its preference for home rule as the preferred choice of structuring the relationship between state government and cities so that cities are empowered to ‘administer [their] own affairs to the maximum degree’ with ‘the right to determine the form of government’ and to ‘define the nature and scope of municipal services involving matters of purely local concern.’”

The brief further states that “regardless whether Seattle’s tax is considered an excise tax or a sui generis income tax, it is permissible under the broad legislative authority conferred by RCW 35A.11.020.”

AWC staff told Lens that the brief only applies to a narrow portion of the lawsuit. They added that if upheld, the King County Superior Court ruling could have long-term implications for local taxing authority.

But that claim doesn’t pass the sniff test, says Washington Policy Center Government Reform Director Jason Mercier. He told Lens that “their brief totally ignores statutory prohibition.”

In an Oct. 24 blog post, Mercier wrote “call me crazy, but that seems like a pretty clear prohibition by the legislature that should have given AWC pause before asking the state Supreme Court to allow every city the power to impose an income tax.

“Perhaps Washingtonians should check with their city council members to see why they think they should have the right to impose an income tax,” he added.

Filing jointly with AWC was the city of Olympia, a reversal from its previous stance in 2016 when it sued to keep a measure off the ballot creating a local income tax, concluding “the Legislature has expressly forbidden cities from imposing a tax on net income.”

 

1 COMMENT

  1. Good work, TJ. Jason Mercier is exactly right. Even though AWC asserts that the brief covers only the home rule issue, they actually do include a statement that “The only constraints should be where the Legislature has preempted tax authority or where a municipality seeks to tax governmental activities of another municipality and triggers issues of governmental immunity. Neither circumstance is present in this case.” (Section III.B.1 of the brief). They are saying that no statute prohibits cities from imposing an income tax. But RCW 36.65.030 unambiguously says “A county, city, or city-county shall not levy a tax on net income.” Period. The superior court explicitly noted that in its decision. That sentence, “Neither circumstance is present in this case”, is just plain wrong, and should be withdrawn by AWC with apologies to the court for misleading them.

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