This afternoon Council members Herbold and Sawant joined with Mayor Ed Murray to announce their proposal for a city income tax on high-income households.
Their proposal is a tax on income above a certain threshold: $500,000 for joint filers and $250,000 for single filers. From their press release:
The proposal would place a 2 percent tax on joint filers’ income over $500,000 and single tax filers’ income over $250,000. The estimated $125 million in new annual revenue would allow the City to lower the burden associated with property taxes and other regressive taxes, replace federal funding potentially lost through President Trump’s budget cuts, enhance public services such as housing, education, transit, and/or create green jobs while meeting the City’s carbon reduction goals.
There has been speculation that they would try to skirt around the state prohibition on taxing income by structuring the tax in some other way than “net income,” but apparently in the end they decided instead to directly challenge the state law. That will consist of two battles: overcoming the state law, and then overturning previous rulings by the State Supreme Court finding that an income tax violates the state constitution.
There are many details left to work out, including exactly how the revenues will be split across potential uses: public services, housing and homelessness, compensating for loss of federal funding, and offsetting more regressive taxes. The city will also need to staff up a new department and processes to administer and enforce an income tax, since there are neither county nor state bureaucracies they can lean on to do this for them.
Six weeks ago when this effort was starting, I wrote about what was being contemplated and what it would take to implement it, including building a mini-IRS. Originally the Trump-proof Seattle Coalition proposed a 1.5% tax on income over $250,000, and it estimated it would raise $125 million. Herbold, Sawant and Murray have apparently stuck with the revenue target and $250,000 income threshold, but now believe it will take a 2% tax to raise it.
Wednesday evening at 5:00pm, the Council will meet in committee to hear a briefing on the proposal followed by a public comment session.