Seattle income tax: Public records edition

Sep 19, 2017

Based on the 1st installment of public records (322 pages) from the Seattle City Council on communications about the city income tax, it looks like this process started back in 2016. The Economic Opportunity Institute (EOI) approached councilmembers at least as early as January 2016 (more than a full year before it signed a $49,500 contract with the council to help develop the income tax ordinance). Something that is sure to give open government advocates some heartburn is the fact there was a series of private meetings during the Spring/Summer between councilmembers, city staff, EOI & other groups developing the income tax ordinance. This may explain why the process looked so rushed to those on the outside and so little time was spent going through legal questions and policy implications of the proposal during the “public” council meetings (see page 145).

Here are some of the interesting councilmember emails released: 

  • January 6, 2016 – The plot thickens with EOI email to councilmembers in 2016: “We are eager to proceed with the idea of a privilege tax on the wealthy. The dedication of funding includes a provision for family leave. We have a good coalition, some funding, and a commitment to moving forward. It would be good to do this through a City Council action to place a referendum on the November ballot.” (Page 7)
  • January 11, 2016 – Hmm, wonder why this proposal didn’t happen in 2016? Seattle councilmembers start coordinating with EOI on income tax pending ok from City Attorney: “The City Attorney's office is reviewing your draft ordinance and will give me their preliminary read later this week; their opinion/perspective is crucial here for obvious reasons.” (Page 12)
  • December 16, 2016 – After City of Olympia voters reject local income tax, EOI again makes the pitch for a Seattle income tax: “We did learn a lot about the legal pathways and viability for local income taxes. And we do think that the worst thing we could do would be to curl up in depression. We were so close. So we are planning to move forward this local strategy for income taxes in 2017, in Olympia, Seattle, and maybe another city . . . I have had good positive talks in the past few weeks with Councilmembers Herbold, Burgess, O’Brien, and Sawant.” (Page 38)
  • February 14, 2017 – Happy Valentine’s day Seattle taxpayers. EOI requests meeting with Seattle attorney: "I wanted to give you an update and request a meeting with you. As you may have heard, we have been working on a local excise tax on unearned income for those households with AGI in excess of $250,000. We have convened meetings with 100 people, and 35 organizations participating. The core team includes the Economic Opportunity Institute, the Transit Riders Union,, Seattle Education Association, and many others.” (Page 13)
  • April 25, 2017 – Budget Policy Center involved with messaging: “I hope you will agree with the conclusion we reached in the Trump Proof Seattle coalition – that it serves both efforts best to have a clear distinction between what is being advanced in Seattle to set up a court challenge on the income tax – a high earners income tax - and what the All in for WA coalition is advocating for at the state level – a capital gains excise tax.” (Page 35)
  • May 20, 2017 – Best laid plans. EOI says to engage Mayor Murray on income tax for his legacy: “Plus we need to get the Mayor’s team fully engaged as this can be his legacy….” (Page 33)
  • June 2, 2017 – Call this the understatement of the year: “From a public communications point-of-view, the legality of this ordinance proposal should not be the focus – that is not our campaign’s strength, that is not what motivates our base, that is not what will moves persuadable people on this.” (Page 4)
  • June 15, 2017 – Councilwoman Bagshaw tells EOI the "tax the rich" message might be too anti-business: "John, have you had any opportunity to talk with leaders in the business community about this? I have been surprised by some comments. In summary, some are opposed (no surprise there), but many more have expressed support to the income tax but are feeling strongly that the 'tax the rich' sentiment is divisive and will not serve us well in the long run." (Page 37)
  • July 6, 2017 – Concern from Councilwoman Herbold about including S-corps in the new tax: “At the end of the day, we may not be making the policy decisions we'd otherwise like to make, if we were operating under a different framework, simply because a tax on *net* income is not legal and we have made a commitment to make policy choices based upon the best *legal* pathway.” (Page 63)
  • July 6, 2017 – Rep. Noel Frame (D-36) also expresses concern with including small biz in new tax: “I just saw a post from a Democrat who is a small biz owner saying by using line 22 of IRS Form 1040 (‘total income’), we're inadvertently hitting LLCs, S-Corporations and sole proprietorships. If that is true, I want to make sure it's corrected to the best of our ability before the ordinance goes through. We do not want to animate the small business community against this. We just did with our proposed B&O increase in the state revenue package and it's really not a fun fight. Mostly because its a lot of little guys that we want to help, not hurt. And the B&O tax on gross, rather than net, receipts already sucks for them.” (Page 65)

Thanks to public records we are able to see how much work the Seattle Council did on the income tax without public involvement or oversight. Had this been the Legislature, however, it is unlikely these details would have ever been released (as we pointed out last week). It will be interesting to see what additional details we learn when the next installment of public records is released by Seattle.  

Additional Information 
Liberal group asks to be added to Seattle income tax lawsuit
Timeless advice from WA Supreme Court on income taxes
Local Income Taxes Are Illegal in Washington state