Taxes

Seattle Saved From Punitive Income Tax

King County Superior Court Judge John Ruhl ruled that Seattle's recent income tax is illegal.

Business Review Board · Nov. 28, 2017

In a little-noticed court decision Monday, King County Superior Court Judge John Ruhl ruled that Seattle’s recent income tax is illegal. We argued it was back in July, so we’re glad Ruhl came to the right conclusion.

“Today’s ruling is a victory for all taxpayers in Seattle and throughout the state, and for everyone who values the rule of law,” said Brian Hodges, an attorney with Pacific Legal Foundation, on behalf of the Seattle residents challenging the tax. “The court performed a service for all taxpayers, and all property owners, by defeating the city’s strategy to undermine their rights.”

As we noted in July, Seattle has hiked its minimum wage, hurting low-income workers by reducing jobs and hours. The city likewise wanted to specifically target wealthier people with a 2.25% tax only on people earning more than $240,000, or $500,000 for couples, annually. Of course, the legal challenge was inevitable. Washington state is one of seven states without an income tax, and state law prohibits cities from levying one — especially one that’s “uneven.” Seattle’s tax was in essence a bill of attainder (outlawed in Article I, Section 9) specifically targeting one group of citizens for the “crime” of earning more money than other people.

The city resorted to some creative rationale to defend the tax. That included arguing it wasn’t an income tax but an “excise tax,” despite the first sentence of the city ordinance calling it … an income tax. But Ruhl wasn’t fooled. “The City’s tax, which is labeled ‘Income Tax,’ is exactly that,” he wrote. “It cannot be restyled as an ‘excise tax’ on the alternate ‘privileges’ of receiving revenue in Seattle or choosing to live in Seattle.”

We’ll see if the same wisdom wins the day if and when the city appeals to the Washington Supreme Court.

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