Officials estimated Seattle would need to spend up to $13 million on an information-technology system and hire as many as 50 new staff in order to collect the tax. The city is appealing a November court ruling against the measure.
When Seattle passed an income tax on wealthy households, officials estimated the city would need to spend up to $13 million on an information-technology system and up to $6 million annually on as many as 50 new staff.
But a King County Superior Court judge ruled the measure illegal in November, throwing into doubt the city’s stated plan to start collecting the tax in 2019.
The city filed an appeal in December asking the state Supreme Court to review the ruling, and doesn’t yet know whether the case will be heard. Reaching the Supreme Court was a major reason for the measure, because a ruling for Seattle there would have statewide implications.
In the meantime, the lower-court ruling left officials with a decision to make: Should they move ahead with preparations for collecting the tax or not?
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In an email, a spokeswoman for the city’s Finance and Administrative Services said the city won’t be buying an IT system or bringing on new staff this year.
This year’s costs “will be limited to planning efforts,” said the spokeswoman, Cyndi Wilder. “We do not anticipate major technology expenditures or hiring of additional staff.”
The law that adopted the income tax last year directed the city’s finance director to write rules for the tax by Nov. 15, 2018 — and that work can still happen, Wilder said.
“These rules will explain the Seattle Municipal Code related to this tax and provide guidance for taxpayers,” she said, adding, “We expect to spend no more than $30,000 for legal services in planning the rulemaking effort.”
“We also need to plan for an income-tax return filing and processing system, taxpayer-education strategies and tax-compliance strategies,” but existing staff will carry out those planning activities, Wilder said.
It’s unlikely the Supreme Court will take up the case and rule by the end of this year. Regardless, it’s “highly unlikely” the city will be ready to collect the tax in 2019, Wilder said.
Seattle has incurred other expenses on outside help with the tax, which Mayor Jenny Durkan once called “a longshot,” under state law and the state constitution.
The city signed a contract in July to pay lawyers from Pacifica Law Group up to $250,000 to help the city defend the income tax in court.
Before that, the city agreed to pay Pacifica, other lawyers and the Economic Opportunity Institute a total of $125,500 for help drawing up the measure — a 2.25 percent tax on total income above $250,000 for individuals and above $500,000 for married couples filing together.
Proponents said the outlay would be more than worthwhile — as a legal test case and because the tax would raise about $140 million per year.