Well I’ll be damned. The oldest, most elusive unicorn in local progressive politics has been spotted, galloping tantalizingly into view.
I’m talking about the local or state income tax. Somehow taxing wealth has been a quest of liberals around here since at least the Great Depression. But something — the courts, the state constitution, the voters, big money — has always gotten firmly in the way.
Until Monday. When a state court of appeals shocked even the lawyers in the case by ruling that Seattle can likely have an income tax of sorts after all.
“We’re elated,” said John Burbank, the director of Seattle’s Economic Opportunity Institute, who has been working on an income tax for the past 20 years. “We rate this ruling a 9 out of ten — and I don’t even know if a ten was possible. A ten would have been in the realm of fantasy.”
This news was presented in some outlets as a loss for Seattle’s high-earners’ income tax, which the Seattle City Council passed in 2017. The court, bowing to a 1933 precedent, did throw out the Seattle tax because it is aimed at the rich only and doesn’t tax everybody equally.
But it was actually what the city was hoping for. The judges not only said it was OK for cities to levy income taxes as long as they charge everyone the same rates. But more importantly, they all but invited the state Supreme Court to revisit the 86-year-old precedent case that bars graduated, different rates — a ruling that has stymied progressive dreams for decades.
“We are constrained … to follow our Supreme Court’s existing decisions,” the three-judge panel wrote, sounding sort of apologetic about it. “Arguments to the contrary can be resolved only by our Supreme Court.”
This was the crazy hope of this gambit in the first place. Knowing an income tax would be challenged, and knowing it would be thrown out by lower courts, the City Council’s strategy all along was to probably lose as it improbably snaked a path up to the high court — where it would shoot for a once-a-century, paradigm-changing ruling.
I’ll be the first to admit, I didn’t think it would work. The city hasn’t exactly wowed of late with its legal wizardry. The latest low point was the predictable thrashing it took in court last month for its ham-handed efforts to save the Showbox music club.
And the city could still fail here. The state Supreme Court could decline to hear the case, or could hear it and sustain the 86-year-old precedent. Even if an income tax wins in court, there still will be countless political hurdles to applying such a scheme statewide (you could call such a ruling the “Tim Eyman Permanent Employment Act”).
But, says Burbank: “What just happened is they cleared away all the underbrush. Now the court can go to the heart of the issue.”
Legally, the heart of it is that in 1933 the court ruled that income was technically “property,” like land. So it can be taxed only at a uniform rate of up to 1 percent. Both this finding and the voters have stymied generations of tax reformers — including Republican Gov. Dan Evans in the 1960s — who sought, with a graduated income tax, to shift more of the burden off the middle class and onto the rich. Instead, our state is ranked as the most regressive in the country, meaning the poor and working classes are hit far harder here than in other states.
Longtime UW law professor Hugh Spitzer wrote the definitive takedown of that 1933 ruling. He says it was mistaken even at the time, and it has been rendered a relic of a bygone era by subsequent rulings. Also, the income you make each year is obviously not “property,” he wrote — it’s fluid and is taxed once, while property is an asset that gets taxed repeatedly.
“The time (is) ripe for a reevaluation of whether a graduated net income tax is currently permissible under Washington’s constitution,” Spitzer concluded.
He wrote that in 1993 — 26 years ago! Spitzer, now 70, is still saying the time is ripe, working as a legal adviser to Seattle on the current case. Still chasing that unicorn.
Of course the thing about unicorns is they tend to remain maddeningly out of reach. But this one’s now in sight, which it definitely wasn’t last week. It hasn’t been for probably 50 years.
Correction: A previous version of this column incorrectly said a Washington State Supreme Court ruling on income tax was in 1935. It was 1933.