Key Findings

1. Seven Washington cities have already acted to ban a local income tax including Battle Ground, Granger, Kennewick, Moses Lake, Spokane, Spokane Valley and Union Gap. The city council is asking Yakima voters via Proposition 3 to make theirs the eighth city to ban a local income tax.

2. Despite striking down Seattle’s specific graduated income tax, a surprising July 2019 decision by the Court of Appeals opened the door to some type of local income tax.

3. The Legislature this year also narrowly adopted a capital gains income tax (with no local preemption) with the stated goal from supporters of using the courts to bring Washington a broad-based income tax without a constitutional amendment.

4. The proposed exception included in Proposition 3 for a tax on real property is unnecessary for an income tax ban but it doesn’t change the meaning or intent of the ballot measure.

5. For years the Washington Department of Commerce has made the state’s no-income-tax policy a major selling point for its “Choose Washington” jobs promotion campaign.

6. A “No” vote on Proposition 3 would retain the ability of future local officials, under current court rulings, to impose a flat income tax on Yakima residents and businesses.

7. A “Yes” vote on Proposition 3 would prohibit officials in the city of Yakima from imposing an income tax without a vote of the people.

Introduction

This November voters in the city of Yakima will consider ballot measure Proposition 3, a charter amendment that would prohibit city officials from imposing a local income tax. The effort comes as state
lawmakers this year enacted Washington’s first statewide income tax, on capital gains income, a bill whose constitutionality is being challenged in the courts.

Other cities have already acted to prevent a local income tax. A similar charter amendment was adopted by 72% of Spokane voters in 2019.1 Officials in Battle Ground, Granger, Kennewick, Moses Lake, Spokane Valley and Union Gap have adopted resolutions opposed to a local income tax.2 The Washington Policy Center has long recommended avoiding the imposition of an income tax at the state or local level.

Even though imposing local income taxes has long been understood to be against state law, local officials in at least one city (Seattle) have tried to impose one illegally in hopes of getting a court ruling that would allow a local income tax.

Despite striking down Seattle’s specific graduated income tax, a surprising July 2019 decision by the Court of Appeals opened the door to some type of local income tax.3 That decision is now effective law in Washington because the State Supreme Court declined hearing the case, leaving the Court of Appeals ruling in place.

Read the full Citizens' Guide here.