Spokane voters to consider local income tax prohibition

By JASON MERCIER  | 
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Jul 1, 2019

In 2017, the Seattle City Council tried unsuccessfully to circumvent state law by imposing an illegal local income tax. Two years later, voters in Spokane will have the opportunity to take the exact opposite approach by amending the city’s charter to prohibit any possibility of a local income tax. Spokane Initiative No. 2019-2 (Charter Amendment Prohibiting a City of Spokane Income Tax) has qualified for the November ballot. If successful, this effort will prohibit Spokane from being able to impose an income tax without a vote of the people regardless of any changes to the state law concerning a local income tax. 

According to a press release by Better Spokane:

“A Yes vote on Proposition 2 protects taxpayers and ensures future regional competitiveness by prohibiting the City from following Seattle’s lead and going it alone in adopting a city income tax or even a city business and occupation tax. Despite repeated rejection by voters, the state’s largest city and state legislators have attempted to give local governments the authority to adopt their own income taxes.”

The text of Initiative No. 2019-2 asks:

“Shall the Spokane City Charter be amended to prohibit the City of Spokane from imposing an income tax on wages, salaries, investments, the sale of goods or services, or any other income source?”

An April 23, 2019 analysis from the City of Spokane Hearing Examiner found no legal problems with the proposed text of Initiative No. 2019-2. The Hearing Examiner wrote (in-part):

“The proposed initiative, if enacted, would add a new provision to the Charter prohibiting the City of Spokane from enacting a local income tax . . . The Hearing Examiner concludes that the city government currently does not have the authority to adopt a local income tax, either under the state constitution or pursuant to state statute. Thus, the proposed initiative does not impinge upon any existing authority vested in the city government . . . In the Hearing Examiner’s view, the proposed initiative is consistent with the state statute [prohibiting a local income tax]. If anything, the measure incorporates the statutory prohibition of a local income tax into the Charter.”

This analysis is not surprising considering the City of Seattle Attorney’s Office in 2014 also found cities do not have the authority to impose a local income tax. If a local income tax is already against state law, what do the sponsors of Initiative No. 2019-2 hope to accomplish?

Despite the clear prohibition in state law against a local income tax, the Seattle City Council enacted one anyway in hopes of persuading the courts to ignore their prior rulings and allow an income tax. Inexplicably, the Association of Washington Cities (AWC) also filed an amicus brief in that litigation claiming that despite the statutory restriction, every city in the state already has the authority to impose an income tax.

Despite that strange AWC brief, based on the 2014 Seattle income tax legal memo and April 2019 Spokane Hearing Examiner’s analysis, it is clear city attorneys believe a local income tax is illegal. King County Superior Court agreed in 2017 striking down the illegal Seattle income tax. We’ll also hear soon from the Court of Appeals on that case.  

Aside from income tax proponent’s Hail Mary pass in the courts, there is also the possibility the legislature could change the law. One such bill was proposed this year by Sen. Hasegawa. SB 5928 (Eliminating the prohibition on local net income taxes), however, did not receive a public hearing.

Notwithstanding any changes from the court or the legislature to the current local income tax ban, Initiative No. 2019-2 would ensure that no local income tax could be imposed in Spokane without a vote of the people. The only way Spokane’s Charter can be changed is with approval by the people.

Along with Initiative No. 2019-2, Spokane voters this November will also be considering a charter amendment to require transparent collective bargaining agreements.