City appeals income tax case directly to state Supreme Court

This afternoon the City of Seattle filed notice that it would be appealing the recent judgment in the challenge to its ordinance imposing an income tax. It has chosen to bypass the Court of Appeals and take the case directly to the state Supreme Court.

On November 22nd, King County Superior Court Judge John Ruhl dealt a major blow to the city’s hopes to establish an income tax, with a devastating ruling that granted almost no points to the city.

As I’ve explained previously, the city needs to jump two hurdles in order to win this battle. First, it needs to convince the courts that its income tax doesn’t violate the state law prohibiting a tax on “net income” — or alternately that the law was illegally constructed and should be tossed out. Second, if it wins that claim it must then argue that previous state Supreme Court rulings that income is property were wrongly decided and should be overturned, so that its income tax doesn’t run afoul of the state constitution’s requirement that property be taxed uniformly (the city’s income tax excludes an individual’s first $250,000 of earnings). At the trial court level, Judge Ruhl upheld the state law and found that Seattle’s income tax is indeed a tax on net income and thus illegal. He didn’t address the question of whether income is property (because he didn’t need to), but if he did he most likely would defer to the past Supreme Court precedents since only the Supreme Court can overturn its past decisions. The Court of Appeals would face the same restriction.

Seattle is cutting to the chase, knowing that its only path to victory is at the Supreme Court.  However, that doesn’t mean that the Supreme Court will agree to hear the case. The principle of jurisprudence that a court should only consider constitutional questions if it can’t decide a case on statutory grounds means that at every level the courts will first need to answer the question of whether Seattle’s tax is on “net income.” But the Supreme Court is probably much more interested in the second question, and if it feels that it won’t get a chance to rule on it then it is likely to decline the case and let the Court of Appeals handle it instead.

There is no timetable for the state Supreme Court deciding whether to take a case; briefings must be filed by both parties, and then the court will consider it. As a point of comparison, the Initiative 124 case was appealed directly to the Supreme Court in July, and the Court has not yet made a decision as to whether to take it.


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