The Washington State Division 1 of the Court of Appeals issued a ruling on the city of Seattle’s income tax ordinance that declared the meausure illegal, and also struck down a 1984 state law prohibiting local governments from imposing income taxes. Although many observers anticipated the plaintiffs would appeal to the Washington State Supreme Court, their legal counsel – consisting of former state supreme court justices, associated justices and state attorney generals – is asking the Court of Appeals to reconsider its decision. Meanwhile, the court has asked Seattle for a response.
In its 51-page brief, the plaintiffs’ legal counsel argue that the Court of Appeals ruling erroneously interpreted the single subject rule as described in Article II, section 19 of the state constitution, which was the basis for the court’s reasoning on the 1984 state law. The brief also claims that by refusing to consider whether income is intangible property, it ignored previous state supreme court decisions.
Washington Policy Center Government Reform Director Jason Mercier described the brief to Lens as “devastating,” adding that the court requesting a response from Seattle shows “this is just not going through the motions. This is not just a pro forma exercise.”
Composing the legal counsel are former state Attorney General Rob McKenna, former state Supreme Court Chief Justice Gerry Alexander and former Supreme Court Justice Phil Talmadge, who served as a legislator during the 1984 session; also representing the plaintiff are Eric Stahlfeld with Freedom Foundation and Scott Edwards and Ryan McBridge from Lane Powell PC.
Seattle’s income tax has been repeatedly declared illegal by both King County Superior Court as well as the Court of Appeals. However, what has made all the difference for both supporters and opponents are the grounds on which the ordinance has been ruled invalid. King County Superior Court Judge John Ruhl’s 2017 decision did not take up the constitutional question of whether income is considered property under the state constitution. Instead, he struck it down strictly on statutory grounds for violating the 1984 state law, which states “a county, city, or city-county shall not levy a tax on net income.” He also ruled that cities needed explicit statutory authority to enact a tax.
However, the Court of Appeals’ July 15 ruling argued that the city ordinance was illegal on constitutional grounds only. The state law barring a local income tax was declared unconstitutional for violating the single-subject clause.
The 1984 law was passed in response to Amendment 52 to the State Constitution approved by voters in 1972 authorizing the creation of city-county governments. However, confusion arose in 1975 as to their taxing authority due to a state attorney general opinion. In 1983, the state legislature approved SHCR 2 which directed the local government committees to examine the issue. The result of that process was SB 4313 introduced in 1984; included in the bill was the local government income tax prohibition. The bill passed the Senate 43-5 and in the House 94-1.
“It was a non-controversial bill,” the brief states. “It was not part of some backroom deal. It was part of a bill created in a special joint committee environment and enacted openly after public hearings.”
Citing the Washington State Supreme Court decision in Culliton v. Chase, the brief also critiqued the Court of Appeals unwillingness to declare income as “intangible property” and thus exempt from property taxes under state law.
Seattle has until Sept. 23 to respond.