Senate schedules graduated local income tax bill for public hearing

Jan 18, 2022

A Senate bill to authorize local governments to impose a graduated local income tax has been scheduled for a public hearing on January 20. SB 5554 will be heard by the Senate Committee on Housing & Local Government at 8 a.m. on Thursday. Meanwhile, the Douglas County Commissioners today unanimously adopted a resolution opposing a local income tax.

Douglas County is the seventh county to act joining Benton County, Chelan County, Franklin County, Grant County, Spokane County and Yakima County as well as 12 Washingtons cities with local income tax bans including Battle Ground, DuPont, Granger, Kennewick, Longview, Moses Lake, Richland, Spokane, Spokane Valley, Union Gap, West Richland and Yakima.

Local governments are passing these bans in response to a surprising 2019 Court of Appeals ruling that opened the door to a flat 1% local income tax. The state Supreme Court let this ruling stand by not considering the appeal. I’ve heard that additional local governments will also soon act based on the legislature hearing SB 5554.

From SB 5554:

“Subject to subsection (4) of this section, a county, city, or town that meets the following requirements may levy a graduated tax on personal or business net income…”

Though the Court of Appeals authorized a flat 1% local income tax, for SB 5554 to be fully implemented a constitutional amendment would also be needed to allow a graduated income tax.

SB 5554 is the latest action by lawmakers trying to impose an income tax. Last year the legislature adopted a capital gains income tax (while refusing to pre-empt cities from imposing a local version) with the stated goal from supporters of using the courts to open the door to income taxes across the state. The capital gains income tax is currently subject of litigation arguing it is unconstitutional with a summary judgment hearing scheduled for February 4 at 10 a.m.

Not only have Washingtonians rejected 10 straight income tax ballot measures (including six proposed constitutional amendments), but last December the WA Tax Structure Work Group received an update from its consultant on the community meetings and outreach it conducted showing that voters are still opposed to an income tax.

As more cities and counties act to ban a local income tax, hopefully this clear and consistent message opposing an income tax will finally be heard by state lawmakers and the Governor.

Additional Information
No surprise, Tax Structure Work Group process finds voters still don’t want income tax
Briefs filed in capital gains income tax lawsuit
Yakima voters overwhelming adopt local income tax ban charter amendment
Washington cities move to prohibit local income taxes

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