Tax fairness is something we’re going to be hearing a lot about over the next few months in D.C. It’s even been reported that the president’s senior advisor, Steve Bannon, is considering a plan to raise taxes on the rich. This idea is getting a test run in the other Washington, where Seattle’s city council voted unanimously to create a new income tax on high-earners.
The measure requires residents making more than $250,000 annually, or couples making over $500,000, to pay a 2.25 percent tax on income above those levels.
So why is the Seattle income tax a bad idea?
Let’s start with the fact that it’s illegal.
Washington state law is clear that a city is prohibited from enacting an income tax. The state constitution also states that property must be taxed at a uniform rate, and the state Supreme Court has ruled repeatedly over decades that income counts as property in that constitution. Furthermore, voters statewide seem to want to keep it that way: Five times state voters have rejected constitutional amendments to impose a graduated income tax, and four times they have rejected proposals to call an income tax an “excise tax.” In 2010, voters rejected a state income tax by almost a two-to-one margin (64 percent to 36 percent). A 2010 income tax proposal was voted down in 38 of 39 counties, including King County, home of Seattle.
You might think this all of this makes the tax ripe for a legal challenge, and you would be right. More than a dozen Seattle residents who would be hit by the tax have now filed lawsuits. Two free-market organizations, the Opportunity for All Coalition and the Freedom Foundation, are assisting these challenges.
It’s unnecessary.
One might reasonably ask, Why would a city with low unemployment and wage growth well above the national average mess with a winning formula? It turns out pro-tax activists are not too choosy about their arguments, so long as the conclusion is increasing taxes. Some argue for “Trump-proofing” the city from future federal spending cuts that have yet to materialize. Others argue that the rich should pay their “fair share” for the social services and other government programs they prefer.
Supporters haven’t even agreed on what the increased tax revenue would be used for, much less argued that the taxes are necessary at all. As Katie Wilson, General Secretary of the Transit Riders Union and advocate for the new tax explained, “We don’t want to get too hung up on what it would fund …”
And it will never be enough.
Seattle’s city revenues have been rising as a result of a good local economy. They just haven’t risen enough for progressives whose appetite for more tax money is insatiable. Advocates are already looking past this tax increase. The city’s Transit Riders Union, part of the coalition that supports the new tax, includes the following in the frequently asked questions section of its TrumpProofSeattle.org website:
Q: Why only [create a new income tax in] Seattle? Why not the entire state?
- Washington State desperately needs a statewide progressive income tax, and we see passing a measure in Seattle as a strong step in that direction. Seattle is the best place to start because our city is progressive and willing to push the envelope to do the right thing.
Liberals’ laundry list of favorite programs can never be funded the way they want just by taxing the rich. Such levels of government spending will require heavy taxation on a much larger tax base, namely the middle class. If liberals don’t want to get hung up on what they fund today, they won’t want to get hung up on who they tax tomorrow. Remember that the next time you hear a beguiling call for “tax fairness.”
April Ponnuru (@AprilPonnuru) is a contributor to the Washington Examiner’s Beltway Confidential blog. She is a senior adviser at the Conservative Reform Network. Previously she was an adviser to Jeb Bush’s presidential campaign.
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