Any discussion of tax reform shifts quickly to “tax the rich” with avowed socialist Senator Bernie Sanders (I-VT) and Sanders wannabe Senator Elizabeth Warren (D-MA) at the forefront of the Democrat 2020 presidential hopeful pack. There are numerous problems with this philosophy, not the least of which is that it’s a political slogan not viable economic policy, but that doesn’t stop the left.
Earlier this year, Seattle passed a “tax the rich” scheme that was immediately challenged. This week, Superior Court Judge John Ruhl ruled that Seattle does not have the authority to impose such a tax.
In July, the Seattle Times reported:
The Seattle City Council unanimously approved an income tax on wealthy residents Monday, a move widely expected to draw a quick legal challenge.The measure applies a 2.25 percent tax on total income above $250,000 for individuals and above $500,000 for married couples filing their taxes together.“Seattle should serve everyone, not just rich folks,” software developer Carissa Knipe told the council before the 9-0 vote, saying she makes more than $170,000 per year.. . . . The city estimates the tax would raise about $140 million a year and cost $10 million to $13 million to set up, plus $5 million to $6 million per year to manage and enforce.The council’s finance committee cleared the tax last week and increased the rate from 2 percent to 2.25 percent.Opponents have argued the tax would violate state law and the state constitution, while proponents have said it would make Seattle’s tax structure more fair and that they want to test the legality of taxing income.
The Freedom Foundation filed suit on the grounds that the tax violates state law and the state constitution, and Judge Ruhl agreed.
Seattle’s controversial tax on the wealthy failed its first legal test this week after a judge ruled the new ordinance violates state law – but the city isn’t backing down and vows to appeal, setting the stage for a Washington State Supreme Court showdown.
King County Superior Court Judge John Ruhl ruled in a Wednesday that Seattle did not have the authority to impose the tax because state law prohibits tax on net income.
City Attorney Pete Holmes called the decision “disappointing” but, in a joint statement with Seattle Mayor Tim Burgess, said their goal to eliminate the state’s “over-reliance on regressive sales taxes” would continue.“We are also living in a time of extreme income inequality that corrodes our social compact and causes many to wonder whether wealthy individuals are paying their fair share,” they said.Opponents of the tax immediately hailed the ruling as proof Seattle officials knew the tax was legally flawed but still pushed it through.“In our system of government, the Legislature makes laws and the courts interpret them,” Freedom Foundation Chief Litigation Counsel David Dewhirst told Fox News in a statement. “If you want to change the existing tax laws, you can ask your legislator to introduce a bill, or you can sponsor a ballot initiative. And if you want to amend the Constitution, there’s a process for that too.”
Amending the state Constitution appears to be the goal of this city tax. Washington does not have a state income tax, and progressive leaders in the state want one but don’t apparently want to take their case directly to the people of the state.
Fox News continues:
Councilmember Kshama Sawant told Fox News in July that the need for the tax is “crystal clear.”She said the city isn’t backing down – and says Seattle is ready to duke it out in court in what’s likely to be a very costly legal battle.“We will no longer tolerate a system that buries poor and working class people in taxes, while giving big business and the super-rich yet another free ride; a system that underfunds affordable housing to the point where thousands are homeless, a system that criminally underfunds education,” Sawant said.. . . . City Attorney Pete Holmes called the decision “disappointing” but, in a joint statement with Seattle Mayor Tim Burgess, said their goal to eliminate the state’s “over-reliance on regressive sales taxes” would continue.“We are also living in a time of extreme income inequality that corrodes our social compact and causes many to wonder whether wealthy individuals are paying their fair share,” they said.
Here’s the joint statement:
Fox News continues:
Washington is one of seven states in the country that does not have a personal income tax.Analysts at the Washington Policy Center also note the Washington Supreme Court ruled in 1951 to invalidate the state income tax. Further, a law passed in 1984 prohibits any city or county from levying a tax on net income.The state’s voters have rejected the idea of an income tax nine separate times. Washington voters did approve an income tax in 1932, but the state Supreme Court ruled the measure was unconstitutional.
The next stop for Seattle’s tax on the wealthy is the state Supreme Court, where it will all but certainly be struck down. It will be interesting to see how the law’s proponents intend to turn this cynical ploy into a state income tax.
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