Lawmakers ask Attorney General to defend local income tax ban

Sep 27, 2017

36 GOP House lawmakers sent a letter to the Attorney General yesterday asking him to defend state law banning a local income tax. This is in response to a decision last week by the judge in the Seattle income tax lawsuit to allow the Economic Opportunity Institute (EOI) to intervene. EOI is arguing that the state law prohibiting a local income tax is unconstitutional (background here).

It looks like this was the exact scenario the City of Seattle was concerned about. In its motion to the court concerning EOI's request to join the lawsuit Seattle warned

"It is unclear at this time how the Washington State Attorney General’s Office will respond to EOI’s challenge to the statute, as no response letter was provided with the Motion. But under the notice statute, the Attorney General is 'entitled to be heard' in any case involving the constitutionality of a state statute. RCW 7.24.110. Thus, EOI’s independent claim could involve the State also moving to intervene in these cases."

As we previously pointed out, EOI raised the exact same argument last year challenging the constitutionality of the income tax ban during the legal fight over the proposed Olympia local income tax. The judge in that case rejected EOI's claim that the law banning a local income tax was unconstitutional.

Concerning the Seattle income tax litigation, EOI explained to the court it is critical to its interests to have Seattle's income tax upheld to advance its efforts to "advocate for local income taxes" across the state.

Lawmakers said in their letter to the Attorney General

"The fact that EOI seeks to see the Seattle ordinance upheld on broad grounds that would support its advocacy for adoption of local income taxes in multiple jurisdictions, not just Seattle, places new state interests at stake in this litigation.

State law provides that the attorney general shall appeal for and represent the state in all cases in which the state is interested. RCW 43.10.030. The state has a fundamental interest in establishing the rules and conditions for commerce within its borders, and the setting of tax policy, has long been viewed as an integral part of that function. For this reason, municipalities must have specific legislative authority to levy a particular tax. King Cty. V. City of Algona, 101 Wn.2d 789, 791 (1984). The legislature has not authorized cities generally to tax personal income. The ad hoc development of a varied patchwork of income tax regimes and administrations is a threat the interests of the state, and precisely the sort of thing that this state law has worked to prevent since its passage."

Now we'll see if the Attorney General agrees with GOP lawmakers that defending state law is of interest to the state. If the Attorney General decides not to defend state law, lawmakers indicated in their letter they may hire outside counsel to do so. They've requested a response from him by October 6. 

During a July 18, 2017 speech to the Washington State Labor Council the Attorney General highlighted that his office has a duty to defend state law and defeat unlawful acts

The Attorney General has filed and/or intervened in several lawsuits since the City of Seattle enacted the local income tax on July 10. To date, however, he has not expressed an opinion on if the decision by Seattle to impose a local income tax was lawful. 

UPDATED (10:44 a.m.)

From the press release announcing the letter to the Attorney General:

“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. 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.”

Additional Information
Seattle income tax lawsuit just got spicier
Seattle income tax: Public records edition
Timeless advice from WA Supreme Court on income taxes
Local Income Taxes Are Illegal in Washington state
Why did legislature pass 1984 local income tax ban?