Bipartisan bill would affirm local income tax ban

Bipartisan bill would affirm local income tax ban
SB 6462 sponsored by Sen. Steve O-Ban (R-28) and with bipartisan support would reaffirm a 1984 state law invalidated by the Court of Appeals which prohibits local income taxes. Photo: freepik.com

The Washington Court of Appeals ruled last year that a 1984 state law prohibiting local governments from imposing income taxes was unconstitutional. Now, a bipartisan group of state lawmakers has introduced legislation reaffirming the spirit of that law.

Sponsored by Sen. Steve O’Ban (R-28) and cosponsored by 15 legislators including three Democrats, SB 6462 states that “a county, city, or city-county shall not levy a tax on net or gross income, except that this section does not prohibit the imposition of gross receipts taxes on businesses as otherwise allowed by state law.” Among the Democrat cosponsors is Majority Whip Mark Mullet (D-5), who is the capital budget chair for the Ways and Means Committee.

A similar proposal has been introduced by Rep. Drew Stokesbary via HB 2479, though it has no Democrat cosponsors.

In its July 15, 2019 ruling, the Court of Appeals found that the 1984 law violated the single-subject clause in the state constitution while ruling on a lawsuit filed against the city of Seattle’s income tax ordinance. The ordinance was overturned, but only on constitutional grounds. In King County Superior Court, the local income tax ordinance had been invalidated on statutory grounds for violating the 1984 law.

The state law has been the source of a war of words in recent legislative sessions. In 2017, Rep. Brandon Vick (R-18) introduced HB 2221 clarifying the 1984 law in order to avert a potential legal argument that it doesn’t prohibit a tax on “gross income.” However, neither King County Superior Court nor the Court of Appeals affirmed this claim in the lawsuit. In disagreement are lawmakers such as Senate Majority Caucus Vice Chair Bob Hasegawa (D-11), who last year introduced SB 5928 to remove the ban on local income taxes.

Aside from the legality of local income taxes, recent polling and election outcomes strongly suggest a lack of voter support. In November, Spokane voters approved an initiative banning a local income tax by 72 percent; roughly the same percentage of Washington voters favor a local income tax ban according to a recent survey by the Washington Policy Center.

SB 6462 has been referred to the Ways and Means Committee, but no public hearing is scheduled at this time. HB 2479 has been referred to the House Finance Committee but no public hearing is scheduled.

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