With a King County Superior Court ruling last year against Seattle’s progressive income tax ordinance, the city is appealing in hopes that the State Supreme Court will directly review the case. However, plaintiffs are divided over the likelihood that this will occur due to how the superior court decision was made.
In a May 21 brief appealing the decision, attorneys for the city of Seattle argued that the council “exercised its broad home rule authority to enact a gross income tax on total personal income. The trial court thus erred in holding a statute that prohibits the enactment of net income taxes barred the City’s income tax.”
The brief also reiterated the city’s claim that the “resolution of these issues requires….revisiting unsound and outdated legal authority that wrongly held a progressive personal income tax unconstitutional.”
Both claims were challenged in a July 30 brief filed by Matthew Davis, attorney for plaintiff Michael Kunath. He wrote that the King County Superior Court ruling centered solely on a state law prohibiting a local tax on net income and should be the only issue considered in the appeal.
A July 30 joint brief filed by other plaintiffs, including the Freedom Foundation, argued that because the ordinance was declared invalid on statutory grounds, the court should avoid addressing the question of whether income is considered property under the Washington state Constitution. Representing one of the plaintiffs is former state attorney general and former gubernatorial candidate Rob McKenna.
Under Washington state’s appeal process, the case can be reviewed by one of three appellate courts or directly by the State Supreme Court. A primary objective for the city’s ordinance is to have the case reviewed by the high court and ultimately to overturn over 80 years of legal rulings declaring income as property, making a progressive income tax legal. The strategy of triggering a legal challenge to the state’s progressive income tax ban has been tried elsewhere after Initiative 1098 was overwhelming defeated in 2010. Since the 1930s, Washington voters have rejected six proposed constitutional amendments to change that prohibition.
However, it remains to be seen whether the Supreme Court will hear the case. In an email, Davis wrote that “it is a foregone conclusion that the Court will accept review, but no formal decision has been made.”
Yet, other plaintiffs aren’t so sure. Freedom Foundation Senior Litigation Counsel Eric Stahlfeld told Lens that the states rules for appeal offer several grounds for which the high court will take up a case, but most of them don’t apply to the Seattle income tax lawsuit. Those include conflicted decisions, a trial court declaring a law unconstitutional, or if the case involves action against state officers or calls for the death penalty.
The only one that could offer justification is “a case involving a fundamental and urgent issue of broad public import which requires prompt and ultimate determination.”
Even then, Stahlfeld says that the concept of “constitutional avoidance” would make it difficult for the justices to address whether income should be defined as property. The review would likely be centered on the state law prohibiting local income taxes.
“The statute pretty clearly says you can’t tax net income,” he said. “It’s awfully hard for anybody to look at the IRS forms” used in the city’s ordinance “and say that’s not net income. A court would pretty much have to say the statute is invalid for some reason.”
That viewpoint is shared by Jason Mercier, government reform director at the Washington Policy Center. He told Lens that although “they’re the high court, they could do whatever they wanted to,” he added “it would be shocking, based on the King County ruling, to totally overlook the statutory prohibitions. To rule for Seattle would be extreme. It’s a Hail Mary. There’s a method to their madness, but it’s a Hail Mary.”
A State Supreme Court ruling last year indicates justices are unlikely to reverse the King County Superior Court decision. The case concerned a 2015 local property tax exemption by the city of Spokane for senior citizens and disabled veterans, which the justices said the city lacked expressed statutory authority to do.
Mercier reiterated warnings that if anything, a capital gains tax passed by the legislature would present the best legal threat to a progressive income tax ban, because “that will get directly to the constitutional question of taxing income.”
“Even if they had a clean test case, it would still be shocking,” he added. “There’s still a chance, but I still would be pretty comfortable that the court would uphold the prior rulings, because of that history.”
It also remains to be seen whether Washington Attorney General Bob Ferguson will intervene in the case. State law calls on the attorney general to “appear for and represent the state before the supreme court or the court of appeals in all cases in which the state is interested.” Ferguson’s office did not respond to a request by Lens for comment by the time of publication.
There is no set date for when the Supreme Court will decide whether to hear the case.