How Seattle might defend its progressive income tax

The city of Seattle has until September 29 to file a motion defending its progressive income tax. Although legal research prepared for the city by a think tank hasn’t been made available yet, statements by city councilmembers and recent court rulings hint at some of the possible legal arguments the city will use in hopes of getting the case in front of a friendly State Supreme Court. Photo: Jeffery Hayes

The city of Seattle has invested nearly $400,000 into crafting and legally defending its progressive income tax ordinance against numerous lawsuits. That amount includes a contract for litigation with law firm Pacifica, not to exceed $250,000. The significant investment of local taxpayer dollars raises questions about what convinced city councilmembers that their ordinance would be upheld by the courts.

The city’s motion to the court defending the tax is due September 29. A $50,000 consultant report by the Economic Opportunity Institute (EOI) that included legal research has not yet been released, but public statements by city councilmembers as well as previous reports by EOI suggest that the city intends to engage in legal jujitsu to get the case in front of the State Supreme Court, where they believe a majority will vote to overturn 80 years of rulings defining income as property under the State Constitution.

Prior to the Seattle City Council’s July 10 vote on the income tax ordinance, cosponsor Councilmember Lisa Herbold said that “legal viability would be our primary consideration in making decisions around the different elements of this legislation.”

During a June 2 interview with Seattle Channel, she said that “it’s not clear,” whether a local progressive income tax is illegal. “We have some of the state’s best attorneys working on this question, with a legal argument that has not yet been made.”

For now, the city is keeping mum about what that argument will be, and an EOI blog post celebrating the income tax ordinance passage was silent on how the think tank expects it to survive the legal challenge.

However, previous EOI reports and recent State Supreme Court rulings point to possible arguments they could make to clear what would appear to be insurmountable legal obstacle.  Under state law, cities require legislative authorization to levy a tax. Additionally, state law specifically prohibits a tax on “net income,” which was cited last year by the State Court of Appeals in its ruling against Olympia Measure 1, which would have imposed a local progressive income tax. As Seattle’s ordinance appears to do, the initiative was intended to trigger a lawsuit.

However, Seattle claims in its ordinance that it has authority as a “first-class city” under state law to “all powers of taxation for local purposes except those which are expressly preempted by the state,” whereas Olympia is a “code city”, and its taxing authority under state law was not used to justify or defend Measure 1.

It’s the same legal argument Seattle successfully used this year to defend its tax on firearm and ammunition sales. In Watson v. City of Seattle, the plaintiff argued that the city lacked the taxing authority because it had not been authorized by the legislature. However, in its majority opinion the State Supreme Court sided with Seattle, arguing that the “ordinance is…authorized by the broad grant of taxing authority delegated to cities like Seattle. Finally, the Ordinance is not preempted by state law.”

In conjunction with that, the city could argue further that the income tax ordinance is levied on “total income,” not “net income,” and therefore is not subject to the state prohibition.

Earlier this year, a group called “Trump-Proof Seattle” proposed getting around the state law with a tax on “unearned” incomes. The war over words was enough for State Rep. Brandon Vick (R-18) to introduce HB 2221 in May. The bill has yet to receive a public hearing.

If the courts accepted this possible semantics maneuver by Seattle, it would be in opposition to the State Court of Appeals, which ruled Olympia’s tax on “gross income” was nevertheless a tax on net income.

The courts would also have to overlook the explicit intent of the legislators who wrote the 1984 law.

According to the bill report (bold emphasis added):

“City-county consolidation was authorized by the voters in 1972 when they approved Amendment 52 to the State Constitution. An Attorney General’s Opinion in 1975 created some confusion over the powers possessed by a combined city-county. The Legislature had not enacted any statutes clarifying the constitutional authorization for combined city-counties. Summary: The following clarification are made . . . (2) A county, city, or combined city-county is prohibited from enacting an income tax . . ..”

Also, the plaintiffs suing the city of Seattle are claiming the progressive income tax violates the Equal Protection Clause of the 14th Amendment.

The complaint states: “The Ordinance, by its plain language, targets ‘high-income residents’ to pay for a variety of general needs, such as providing green jobs, addressing homelessness, replacing possible lost federal funding, creating a legal controversy concerning the constitutionality of a graduated income tax, etc.  Unlike a typical graduated income (tax) in which all persons with an ability to pay bear some tax responsibility, the City’s income tax law states if you’re rich, you pay; if you’re not, you don’t.  There is no rational basis for this distinction.”

However, the possibility of an activist State Supreme Court ruling in Seattle’s favor for ideological reasons is one supporters seem to be counting on. At the July 10 meeting, Councilmember Kshama Sawant said: “we will need to fight this battle in the court, and we will need to be there to fight to win.”

Citing the United State Supreme Court decision in Roe v. Wade, she said that public opinion rather than jurisprudence “forced the justices with no choice if they were to maintain their credibility. Our movement will have to and can do the same thing to defend taxing the rich.”

Using the courts to legalize a progressive income tax is a strategy that proponents have advocated for years. A 2008 EOI report states that “highly respected legal scholars believe that if an income tax measure passed today without a constitutional amendment and was challenged in court, there is a good chance that the Supreme Court would reverse its earlier ruling and allow the tax to stand. An alternative – and more politically feasible – route would be to pass an income tax legislatively, either by initiative or by a majority vote in the legislature and ratifying vote of the people. Such legislation would almost certainly be challenged in court, providing the State Supreme Court with the opportunity to review and possibly reverse the ruling from 75 years ago.”

However, overturning previous rulings would run contrary to repeated directives from previous court decisions directing tax proponents to use other means to legalize it. 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.”

In the 1960 case Apt. Operators Ass’n of Seattle, Inc. v. Schumacher, the court majority wrote that “the argument is again pressed upon us that these cases (prohibiting a progressive income tax) were wrongly decided. The court is unwilling, however, to recede from the position announced in its repeated decisions. Among other things, the attorney general urges that the result should now be different because the state is confronted with a financial crisis. If so, the constitution may be amended by vote of the people.”



  1. As one of the attorneys representing a plaintiff in the lawsuit challenging the income tax ordinance, I have to say that is an excellent summary of the issues. The world needs more thoughtful reporting like this.


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