The Seattle income tax: Why I’m taking a stand
There are many reasons I chose to become a plaintiff in the Opportunity for All Coalition’s lawsuit challenging the Seattle income tax. Aside from it being illegal under state law, and unnecessary given a recent explosion in city revenues, it’s also not in any resident’s best interest. In fact, the more I find out about it, the worse it gets.
Most people who followed the law’s passing in July read about how extreme the income tax is. For example, as described in the Los Angeles Times: “A number of cities have adopted local income taxes, but no other city has solely targeted high earners and few have adopted so high a tax rate.”
But this, like many other reports, fails to highlight what the Seattle City Council’s law really does. While the tax applies to individuals with income over $250,000, and couples with income over $500,000, it is structured to calculate income based on far more than just wages and salaries. So in fact the L.A. Times and others are wrong — this won’t just soak the rich; many more of us will be soaked in the process.
In fact, the tax will hit Seattle residents who have very little, if any, wages or salaries, like my 98-year old co-plaintiff Dorothy Sale. Why? Because in a clumsy and blatant attempt to defy state law, our city council imposed the illegal tax on total income, which includes both net income and capital gains. In other words, anyone selling their home could be hit by both the current 1.78% excise tax Seattleites currently pay and one of the highest city income taxes in the country.
My neighbors, like Dorothy, worked hard, retired years ago and have owned their home for decades. No one would describe them as “the rich”. As their house appreciated in value over the years, they paid property taxes on these gains. But if they downsize, they’ll temporarily be “wealthy” and will have to pay this new income tax as well as the Seattle excise tax — it’s the triple play of taxation.
And they won’t be alone. As Jason Mercier of the Washington Policy Center points out in a policy note, the median value of a Seattle home in September was $730,000 following a strong run up since the Great Recession. There are countless couples in Seattle who stretched their resources to get a new home and whose combined incomes are a fraction of $500,000. But if they sell, the new income tax will sock the combination of their salaries and the gains they made on their house.
This law sticks it to broad swaths of ordinary Seattleites, not just “the rich”. And don’t take solace if none of the above applies to you. Perhaps the best reason to oppose this income tax is that it won’t be long before it does. Every income tax initially targeted at the rich has eventually been expanded by governments to cover lower income earners.
Our local elected officials, whose coffers are already overflowing, want even more money and with their attacks on business and the “rich” they want us to believe they’re only singling out a small number of our neighbors. But in so doing, they’re violating the law, imposing a punitive tax on residents who are far from wealthy and making our city a less attractive place to live, work and run a company. That’s why we all need to take a stand.
Nicholas Kerr lives in Green Lake with his young family. He is a senior marketing manager for a technology company by day and he writes about public policy and being a dad on his blog The Kerrant at night.