Court crashes major U.S. city's soak-the-rich scheme
Seattle (courtesy Pixabay)
The Court of Appeals in Washington State has crashed Seattle’s version of a soak-the-rich taxing scheme that would levy income taxes on individuals making more than $250,000 a year and couples making more than $500,000.
It’s because the state constitution requires property taxes be equal on all people, and the state Supreme Court repeatedly has held that a tax on income is a tax on property.
The ruling settled numerous lawsuits against the tax, unless someone appeals further.
“For nearly a century Washington’s Supreme Court has held that income is property and therefore a tax on income must be uniform on all classes,” said Brian Hodges, a senior attorney at Pacific Legal Foundation, which represented some individuals.
“Any change to that system must go through the constitutional amendment process. The city ignored the law when it adopted its ‘wealth tax,’ hoping to find a court that was unwilling to enforce the plain language of the constitution. We are very pleased that the Court of Appeals saw past the city’s claimed need for more taxes and declared its actions unconstitutional.”
The foundation explained the Washington State Constitution prohibits the government from levying an income tax on targeted segments of the population. Any income tax must be uniformly applied to all citizens.
“Nonetheless, Seattle enacted an income tax targeting those making in excess of $250,000 per year with a 2.25 percent tax rate, setting a 0 percent rate for everyone else. Promoted as a ‘wealth tax,’ the city’s income tax punishes achievement and success, while threatening poor and middle class families who could later fall subject to new city, county, and state taxes if Seattle’s gambit succeeds.”
However, the constitution “provides that all taxes must be ‘uniform upon the same class of property.’ The Washington Supreme Court has repeatedly held that income is property and, therefore, the state’s constitution prohibits targeted income taxes. Nonetheless, Seattle’s city council unanimously adopted an income tax that targets the city’s ‘high-income’ residents,” PLF explained.
Lower income individuals were threatened, the foundation said, because the 0 percent for them was changeable.
“By its plain language, the ordinance imposes an income tax on each and every resident of the city. The income bands and tax rates are temporary. Experience shows that, once a source of tax revenue opens, the government will mine it – meaning that every income level is now exposed to new taxes,” the foundation said.
The court said that in a series of decisions dating back to 1933, the Washington Supreme Court “has unequivocally held income is property, a tax on income is a tax on property, taxes on property must be uniformly levied, and a graduated income tax is not uniform. Therefore, the Washington constitution bars any graduated income tax.”
The city is allowed to have an income tax, but it cannot have different rates for different people, the court said.
Seattle officials had tried to finagle their way through the restriction by claiming that the prohibition on income tax states “a tax on net income” while it was taxing “total income.”
Still the court said, “Seattle’s graduated income tax violates the uniformity clause” in the constitution.
The complaint said: “On at least eight occasions between 1930 and 2003, Washington’s Supreme Court held that a tax on property must comply with the Uniformity Clause of Article VII, Section 1, of the Washington State Constitution, which requires that ‘all taxes shall be uniform upon the same class of property.'”
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