Judge rules Olympia income tax proposal illegal

Aug 24, 2016

A Thurston County Superior Court judge ruled today a proposed ballot measure to enact a city income tax in Olympia is illegal. The Olympia City Council requested an injunction to keep the proposal off the November ballot. Based on the very clear ban in state law on local income taxes, the judge's decision was not a surprise and should help put the brakes on income tax supporters' efforts to "city shop" for a local electorate willing to set up a test case to see if the current state Supreme Court will uphold 80 years of case law banning graduated income taxes. 

The city shopping attempt to force a test case is no surprise given the consistent and overwhelming failure to impose an income tax at the state level. In fact, the last nine times voters have been asked to adopt an income tax they have resoundingly said no

  • 1934 – HJR 12: Yes 43%; No 57%
  • 1936 – SJR 7: Yes 22%; No 78%
  • 1938 – SJR 5: Yes 33%; No 67%
  • 1942 – Constitutional Amendment: Yes 34%; No 66%
  • 1944 – I-158: Yes 30%; No 70%
  • 1973 – HJR 37: Yes 23%; No 77%
  • 1975 – I-314: Yes 33%; No 67%
  • 1982 – I-435: Yes 34%; No 66%
  • 2010 – I-1098: Yes 36%; No 64%

Interestingly, three of those rejected income tax proposals were dedicated to education spending (2010 - 64% no; 1975 - 67% no; and 1973 - 77% no). Two sales tax increase proposals earmarked for education have also been rejected by voters (2004 - 60% no; and 1989 - 66% no). 

Numerous state Supreme Court rulings since 1930 have interpreted Article 7, Sections 1 and 2 of the state's constitution to require taxation of property, including income, to be uniform and limited to 1%. While there is no ban on enactment of a uniform income tax limited to 1%, under eight decades of legal precedents, a graduated or targeted income tax in Washington is unconstitutional. 

While the state Department of Revenue (DOR) says that description of Washington's income tax ban is accurate, it provided this qualifier in an email: 

"Revenue as an agency doesn't take a position on whether the current court would follow the old precedents and hold a graduated or targeted income tax unconstitutional."

This is why there has been an ongoing effort by income tax supporters to find a test case. With today's ruling in Thurston County striking the Olympia income tax proposal from the ballot, those efforts will probably focus again back at the state level (most likely with proposals for a capital gains income tax). 

Unless we want to leave the state's income tax ban up to a mere five votes on the state Supreme Court in hopes they'll follow eight decades of precedent, Washingtonians should encourage lawmakers to let the people act on a constitutional amendment making the state's ban on income taxes crystal clear and immune from judicial tinkering. 

Additional Information
City of Olympia income tax legal briefing

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