Three separate lawsuits have now been filed against Seattle’s illegal income tax. The first lawsuit was filed on July 14. Today two more lawsuits were filed, one by the Freedom Foundation and one by the “Opportunity for All Coalition” represented by former Washington State Attorney General Rob McKenna, former Supreme Court Chief Justice Gerry Alexander, former Supreme Court Justice Phil Talmadge, and Dan Dunne, a litigation partner at Orrick Herrington. Of note in the McKenna legal brief is the fact current Attorney General Bob Ferguson declined a request to take action against the illegal Seattle income tax. From the brief:
“On July 21, 2017, certain Plaintiffs made a demand upon Attorney General Bob Ferguson to investigate the Tax’s illegality, and to file suit on behalf of all Seattle taxpayers specifically and Washington taxpayers generally to enjoin the imposition of the Tax and to obtain a judgment declaring it to be unlawful under state statute and the Washington Constitution . . . On August 3, 2017, Attorney General Ferguson declined to investigate the Tax and challenge its legality in court.”
While all the lawsuits focus on the statutory and constitutional prohibitions against the Seattle income tax, the McKenna legal brief also includes historical context and examples of the unintended consequences of the tax:
Contrary to its billing, the Seattle Income Tax is not a tax solely on ‘the wealthiest citizens,’ but reaches well into Seattle’s middle class in unexpected ways, upending longstanding expectations of families, homeowners, property owners and business owners. Seattle has enjoyed remarkable revenue growth—more than $1.4 billion in just the last four years—so the Tax is not needed. And in many cases—particularly with traffic congestion, affordable housing, and climate change—the Income Tax will directly undermine the very objectives its proponents claim it will solve. In short, as this lawsuit will prove, the Seattle Income Tax does not just tax ‘the wealthiest citizens,’ it is not necessary, and it is illegal.
The McKenna legal brief is structured around these key arguments:
- Washington Voters Have Overwhelmingly Rejected an Income Tax Nine Times;
- Tax Advocates Seek to Use Cities to End-Run Popular Opposition;
- The City Enacts a Graduated Income Tax;
- Key Provisions of Tax;
- The Current Favorable Tax Environment Promotes Opportunity for All in Seattle;
- With Economic Prosperity, the City of Seattle Has Enjoyed Record Increases in Tax and General Revenues; and
- Seattle Income Tax is Illegal and Invalid.
In a blog today McKenna wrote this about the illegal Seattle income tax:
Since courts rule on statutory matters first, that’s where Seattle’s income tax case is likely to end. The courts shouldn’t rule on the constitutionality of a graduated income tax unless the Seattle case somehow gets past the ban on local income taxes.
Even the Seattle elected officials who passed the income tax aren’t predicting success in the courts. Council president Bruce Harrell told the Seattle Channel recently that ‘it is probably time to test the law’ to at least ‘send a signal to the judicial body’ that cities want income taxes, but he didn’t predict success. Councilmember Sally Bagshaw likewise demurred on the city’s chances in court.
Despite the odds, they’re willing to spend taxpayer funds on the case. Some might call that a waste. In Seattle, it’s ‘sending a signal.’
Since the time Seattle enacted the illegal income tax we’ve learned that the City Council signed a $49,500 contract with advocates of the proposal to provide “expertise on economics, financial forecasting, policy research and design, drafting legislation and legal issues to inform the drafting and defense” of the income tax. It is clear Seattle taxpayers will be on the hook for substantially more costs as the city attempts to defend the illegal income tax against these lawsuits.
Jason Mercier is the Director of the Center for Government Reform at Washington Policy Center and is based in the Tri-Cities. He serves on the boards of the Washington Coalition for Open Government and CandidateVerification, and was an advisor to the 2002 Washington State Tax Structure Committee. Jason is an ex-officio for the Tri-City Regional Chamber of Commerce.