Seattle income tax lawsuit just got spicier

Sep 20, 2017

The judge in the Seattle income tax lawsuit just spiced things up even more today by granting the Economic Opportunity Institute's (EOI) motion to intervene. EOI is arguing that the state law prohibiting a local income tax is unconstitutional (background here). From the judge’s order today:

"EOI’s claim and the main actions share at least one common question of law, namely, whether RCW 36.65.030 – upon which the Plaintiffs rely in asserting their claims for relief – is valid. EOI and the Plaintiffs assert opposing positions with respect to the same question: the Plaintiffs’ arguments assume that RCW 36.65.030 is valid, while EOI argues that the statute is unconstitutional. EOI argues that the Plaintiffs’ claims cannot succeed if EOI’s claim succeeds. "

Interestingly, EOI raised this exact argument last year 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 (note page 21 from appeal briefs):

"3.2.5 The trial court did not err by ruling that Chapter 91, Laws of 1984 and RCW 35.65.030 are constitutional. As a last resort, Appellants argue that Chapter 91, Laws of 1984 (as codified by RCW 35.65.030) is unconstitutional because it violates the 'single subject rule' and the 'subject-in-title rule.' Appellants’ argument, however, misrepresents the title of Chapter 91, Laws of 1984. The official Certification of Enrolled Enactment confirms that Chapter 91, Laws of 1984 is entitled 'AN ACT relating to local government; and adding a new chapter to Title 36 RCW.' It is not entitled 'City-County Municipal Corporations,' as Appellants claim. Accordingly, the entire premise of Appellants’ argument is fundamentally flawed and the trial court properly ruled that Chapter 91, Laws of 1984 is constitutional."

Though leaving out the details from the Olympia income tax court ruling, EOI mentioned the Olympia legal fight in the pitch it made to the Seattle Council to move forward with an income tax (obtained via a public records request):

"One approach to systemically remedy the regressive nature of our current tax regime is to begin at the local level with an income tax. We tried this in Olympia this past election, with the Opportunity for Olympia initiative to the people.  And while we did better than any previous vote on an income tax – 47.78% support – we, like Democratic down-ticket candidates, were pushed back by the Trump wave. 

But that is not the end of the story. Much of the legal back-and-forth necessary to get Opportunity for Olympia on the ballot provides us with the necessary and rich background to pursue a local income tax in another jurisdiction. If passed, whether by city council action or by initiative, the ordinance will be immediately challenged by income tax opponents as unconstitutional.

This is what we want, as it provides a pathway to the state supreme court, enabling that court to review and reverse their decisions from 1935 and 1933 in which they equated income to property and thereby disallowed a progressive income tax." 

Based on the details in today’s court order, it looks like the City of Seattle expressed concern that granting the EOI motion “could involve the State also moving to intervene in these cases,” and that “[t]he State’s potential intervention could result in delay.”

Seeing how the main purpose of the 1984 law was to remove any ambiguity about a local income tax, it will be interesting to see if the Attorney General will now step in to defend state law.

Additional Information
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?

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