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Seattle passes income tax, faces possible lawsuit

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KUOW Photo/Kate Walters

Seattle's City Council has unanimously passed an income tax on high earners in the city. Next stop, court.

The Freedom Foundation, an Olympia-based conservative think tank, is already gearing up for a legal challenge against the ordinance.

"We're putting together a coalition to litigate to strike down this tax. We know there are others who have concerns as well," said Jami Lund, senior policy analyst for the foundation.

Lund said he was disappointed in the council's decision to pass the measure Monday. Like other opponents of the tax, Lund said it's illegal under state law and goes against the state constitution.

He said it's likely other groups will also challenge the tax in court.

But far from putting a damper on the enthusiasm of supporters, the legal challenge is something they both expect and welcome. Proponents of the tax have said winning a legal challenge could set a precedent for other cities in Washington who want to follow suit.

Speaking before the vote Monday, Councilmember Kshama Sawant said passing the tax represents a victory but the fight is far from over.

"And just like we have packed City Hall, we will have to pack the court rooms to make it clear that we will no longer tolerate a system that buries poor and working class people in taxes, while giving business and the super rich yet another free ride."

Washington state has one of the most regressive tax systems in the nation, which results in lower-income individuals paying more of their income in taxes and wealthier individuals paying less. Councilmember Tim Burgess said he hopes Seattle's decision will help to spur change across the state.

"We want to compel and jump-start a conversation in our city and state that will result in the status quo being changed so we can move forward to a much more just and fair tax system in Washington."

Lund takes issue with this argument. He said it's unfair for the city to target a group simply because they make more money than others.

"If the current tax system has problems then let's address those. Let's not add an extra injustice to sort of balance another injustice. I would say it's like fighting fire with fire and you end up with all houses getting burnt down," Lund said.

The ordinance passed Monday requires individuals to pay a 2.25 percent tax on total annual income above $250,000. Couples who file taxes together would be required to pay tax on income above $500,000.

Officials estimate the tax would raise approximately $140 million each year. The ordinance earmarks that money for:

“(1) lowering the property tax burden and the impact of other regressive taxes, including the business and occupation tax rate; (2) addressing the homelessness crisis; (3) providing affordable housing, education, and transit; (4) replacing federal funding potentially lost through federal budget cuts, including funding for mental health and public health services, or responding to changes in federal policy; (5) creating green jobs and meeting carbon reduction goals; and (6) administering and implementing the tax levied by this [law].”

In a statement Monday, Seattle Mayor Ed Murray showed his support for the tax.

“Our goal is to replace our regressive tax system with a new formula for fairness, while ensuring Seattle stands up to President Trump’s austere budget that cuts transportation, affordable housing, health care, and social services. This is a fight for economic stability, equity, and justice."

It's unclear when a lawsuit targeting the tax will be filed, but it will likely come soon. The issue will then be up to the courts to settle.

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