Nealey, Republican lawmakers urge Attorney General to defend state law against local income taxes

Rep. Terry Nealey, ranking Republican on the House Finance Committee, and 35 other House Republican lawmakers, sent a letter to Washington State Attorney General Bob Ferguson Tuesday urging his office to “defend the constitutionality of a state law which has recently been attacked in state courts.” The law, RCW 36.65.030, which has been on the books for more than 30 years, prohibits local governments from imposing income taxes on net income.

The city of Seattle, which recently enacted a citywide income tax, is being challenged in court. The Economic Opportunity Institute (EOI), a Seattle-based think tank supporting the city’s position, asserts in a motion to intervene in the case, that Washington’s statute violates the state Constitution which prohibits legislation from having more than one subject. Nealey and the other Republican signatories wrote, “EOI’s arguments to invalidate state law are weak and disingenuous.”

“This intervention by EOI is a clear attempt to broaden advocacy for adoption of local income taxes, not just in Seattle, but in multiple jurisdictions across the state. They want to open the floodgates for income taxes in every part of Washington. It’s a dangerous, slippery slope that would lead to a confusing hodgepodge of local income taxes at varying rates with differing administrative rules,” said Nealey, R-Dayton.

“The uncertainty created by this confusion would be devastating for our economy and job creation across the state. That’s one of the many reasons why voters in Washington have repeatedly rejected an income tax,” Nealey added.

Although the attorney general declined a request by the plaintiff against Seattle to get involved in the suit earlier this summer, Nealey said he and the other Republican lawmakers who signed the letter felt it necessary because circumstances have changed. A Sept. 7 blog post by the Washington Policy Center (WPC) provided an initial alert to EOI’s motion to intervene that put the focus on the state. Nealey says when it became clear Sept. 20 that the judge granted the motion — also blogged by WPC — it was time to ask the attorney general to get involved.

“This lawsuit is very clearly not just about Seattle’s ordinance. There is a party to the suit who now seeks to invalidate a state law that protects all state taxpayers and promotes a level playing field for commerce,” said Nealey, a retired attorney. “It is the attorney general’s responsibility to represent the state in all cases in which the state has an interest. EOI’s intervention would open this to broader jurisdictions and put the state’s interests at stake. Therefore, we are asking the attorney general to vigorously defend the constitutionality of state law that prohibits imposition of local income taxes.”

The letter requests a response by Oct. 6, 2017.

Nealey added the more appropriate venue to discuss and debate local authority to impose income taxes is in Olympia, not in the courts.

“This is about whether there is legal authority for local income taxes. State law forbids it. Let’s not put this before judges in the many jurisdictions across Washington to decide. Bring a bill to Olympia to change the law and let’s have that debate here in the state Legislature. Let the citizens come forward from communities throughout Washington to testify in open public hearings on this issue,” said Nealey. “Until then, we expect our attorney general to vigorously defend state law and the citizens we represent against this backdoor attempt to impose income taxes across Washington.”