Seattle's Crusade Against "The Rich": $47 million Head Tax is repealed a month after it was signed

Lawsuit Says Seattle’s ‘Tax-the-Rich’ Measure Violates State Constitution
Supporters of income tax say a court ruling in favor of it will pave the way for state to follow

By Zusha Elinson | Aug. 9, 2017​

BN-UP923_38Qr6_M_20170809173707.jpg

A woman responds to a speaker at a Seattle City Council meeting about a new income tax on the wealthy on July 10. A lawsuit filed Wednesday alleges the measure violates restrictions on cities to impose such taxes.

A new tax-the-rich measure in Seattle was hit with its first legal challenge Wednesday.

The new Seattle measure, passed by the city council in July, would impose a 2.25% tax on any income over $250,000 or above $500,000 for couples filing jointly. It is expected to impact about 9,000, or 2%, of the city’s taxpayers.

A lawsuit filed by the Freedom Foundation, a conservative think tank, on behalf of 19 Seattle citizens, alleges the measure violates the state constitution as well as restrictions on cities to impose such taxes. A separate group called the Opportunity for All Coalition, founded by Seattle venture capitalist Matt McIlwain, filed a lawsuit later in the day.

Backers of the tax welcome the suits, because they believe a court ruling in favor of the tax will pave the way for a statewide income tax.


The battle in the state courts could lead to a fundamental change to the unique politics of Washington state, a liberal-leaning state with a longstanding aversion to taxing income.

A similar measure lost in the capital city of Olympia last year, and a tax-the-rich statewide initiative was voted down in 2010.

Washington is one of seven states in the country, including Florida, Texas and Wyoming, without an income tax.

The last time voters passed a graduated statewide income tax in Washington it was struck down by the state Supreme Court in 1933 as unconstitutional. The state constitution requires property be taxed at a uniform rate, which the court said applied to income in turning down the tax.

“This tax is illegal and we are confident an independent judiciary is going to uphold the law, is going to uphold 100 years of precedent,” said David Dewhirst, litigation counsel for the Freedom Foundation.

Seattle City Attorney Pete Holmes said he believes city will be able to persuade the state’s top court that the 1930s decision was in error. The state Supreme Court’s attention to current events in recent years, including a ruling that the state was failing to adequately to fund public schools, means the court could be more receptive to taking another look at the income tax issue, he said.

“We’ve acknowledged that this a tenuous legal path forward, but we nonetheless believe it’s viable,” said Mr. Holmes.

David DeWolf, a Gonzaga University School of Law professor emeritus, said the state’s highest court would now be more open to an income tax measure, provided it was statewide and applied to a broader swath of the population, not just a few wealthy residents.

But Mr. DeWolf predicted courts would be skeptical of the Seattle tax because of the restrictions on cities imposing taxes and because of how many people are exempted from paying.

“When you impose a tax it needs to be uniform,” he said.

The Seattle economy is booming with unemployment hovering around 3%, and the city has a balanced budget. Yet as housing prices have soared, homelessness has too.

The tax would bring in about $140 million every year for the city. The money would be used to fund affordable housing, education and transit services, and replace federal funding that might be lost because of federal budget cuts.

 
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Seattle Head Tax 101: What to know about the new proposal
By MyNorthwest.com | May 10, 2018

HeadTax_Meeting_MP_620.jpg

The Seattle had tax proposal is an employee hours tax — a charge per hour, per employee. But the proposal is really two separate taxes, implemented one after the other. The city council is expected to vote on the issue by May 14.
  • About 500 businesses would be subject to the tax, which is about 3 percent of the city’s companies. It would apply to companies making more than $20 million annually in gross receipts.
  • Businesses would be taxed $0.26042 per hour, per employee working in Seattle, or $500 per employee / year.
  • The council proposes to shift away the 26 cents tax to a 0.7 percent payroll tax on Jan. 1, 2021. The city would charge 0.7 percent of all payroll related to work performed in Seattle by those same large companies. The proposal argues that this will tax higher salaries more than smaller ones.
  • Both taxes would raise $75 million annually.
  • If passed, the head tax could be implemented as soon as 2019.
View the Seattle head tax legislation here.

See a timeline of the head tax proposal here.

Reason for the tax and what it will fund

The City of Seattle wants to increase funding for homelessness services and programs for affordable housing as the crises grow. Council members argue that the city needs more funding to do this. The proposal claims that the head tax will raise $75 million annually to put towards building affordable housing and homeless services.

The $75 million from the Seattle head tax would fund:

  • 75 percent (about $57 million) would fund the construction of 1,780 “deeply affordable housing units” over the next five years.
  • Affordable housing would be targeted at residents earning 30 percent of the area’s median income.
  • 20 percent would fund emergency shelter and other services such as building tiny homes, expanding hygiene services, expanding criminal justice diversion programs, services for people living in cars, and adding 362 shelter beds.
The area needs more than 140,000 affordable units, with only about 15,000 offered or are currently being built.

Controversy: Tax Amazon

Proponents of the tax argue that Seattle’s large companies should pay to alleviate housing and homeless crises they helped to create.

The current economic boom, largely fueled by tech companies like Amazon, has drawn highly-paid employees to the region. This has caused rents and housing prices to dramatically rise. There are more people in Seattle requiring a place to live, and the housing inventory is limited. Tech employees can more likely afford rent and landlords have noticed.

The loudest voices in support of the tax have been Councilmembers Mike O’Brien and Kshama Sawant. Sawant has led “Tax Amazon” rallies at Seattle City Hall and in front of the Amazon spheres in the South Lake Union neighborhood. She has said that Amazon and its CEO, Jeff Bezos, are bullies who threaten the city.

Sawant wants to take in $150 million annually from the large companies.

Controversy: Businesses will leave

Many large Seattle companies oppose the tax proposal. Some unions also oppose it. Companies argue that it will hurt jobs and force them to expand outside of Seattle to avoid the tax and save money. Some union workers worry that they will lose construction jobs if businesses move out.

Real estate company Zillow said it would likely place new jobs at its offices outside of Seattle. A letter was also signed by 130 local CEOs in opposition to the tax, including Expedia’s Mark Okerstrom. Expedia is planning to move from Bellevue to Seattle in coming years.

And Amazon has halted construction on its expanding headquarters in South Lake Union (prompting unions to protest the head tax as their jobs are tied up in the project). The company says it may sublease some of its office space in town. At the same time, the online retailer has moved thousands of jobs into Vancouver BC and Boston. Amazon has said that the Seattle head tax is the reason it is halting the expansion. It is awaiting the council’s decision on the matter.

 
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Seattle’s socialist councilmember wants to tax Amazon and other big companies to fund housing: Is that a good idea?
by Taylor Soper on March 28, 2018

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“Ho, ho, hey, hey! Amazon, you have to pay!”

“Let’s shake Jeff Bezos down! We need housing in this town!”

“We are ready to fight! Housing is a human right!”

“Amazon, you can’t hide! We can see your greedy side!”

“Stop displacement! Tax the rich!”

Emotions ran high inside the Langston Hughes Performing Arts Institute on Tuesday evening as leaders from the Seattle community voiced their support for a tax on the city’s largest companies to help provide $150 million annually for affordable housing and homeless services.

Seattle councilmember Kshama Sawant helped organize the town hall event, where more than 200 people packed a room lined with posters that read “Unionize Amazon; Tax Bezos,” and “Tax Amazon; Fund Housing & Services.”

A proposal that would have taxed Seattle businesses earning more than $10 million in gross annual receipts was narrowly voted down by the City Council this past November.

But now the tax, also known as the employee-hours tax or “head tax,” is back on the table at City Hall after a task force earlier this month recommended that City Council pass a tax that would generate $75 million per year in funding — and as much as $150 million per year with additional “progressive revenue options” — to alleviate homelessness and housing issues in Seattle.

Sawant said the city is facing a “social crisis” with rising rent costs and a growing number of people who can’t afford a home. She said Seattle has “become a deeply unequal city.”

There are several huge corporations in Seattle, but Amazon and its CEO Jeff Bezos were clearly the target on Tuesday.

“Is everybody facing this crisis?” Sawant asked the crowd. “Who isn’t facing this crisis? Jeff Bezos is not facing this crisis. Jeff Bezos now owns $100 billion and he has the distinction of being the wealthiest man in the world.”



Sawant said the tax would allow the city to build 750 permanently affordable, high quality homes every year. She also said the head tax would affect the top 5-to-10 percent of companies in Seattle.

“That means not small businesses, but the Amazon’s, the Facebook’s, the Macy’s, the Nordstrom’s — all the companies that are not suffering in any way and can easily, easily afford to pay a small portion of their profits so that we could build affordable homes for everyone.”

In an editorial in The Stranger, Sawant wrote that the tax “would also set an inspiring national example, at a time when Trump is brutally attacking public services, and after his recent ‘tax reform’ bill carried out one of the biggest acts of corporate robbery in decades.”

Others who spoke at the event on Tuesday included people from the Democratic Socialists of America; Socialist Alternative; NAACP; Real Change; a University of Washington grad student; a coffee shop owner; and others.

The head tax that was defeated in December would have collected about $125 per employee, per year from the city’s top-grossing businesses. The Council said approximately 1,100 companies would have been subject to the tax. It would have generated between $20-$25 million per year.

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Several lawmakers and leaders target the booming tech industry as a driving factor in Seattle’s growing homeless population. The city’s business community is experiencing rapid job growth, drawing record numbers of newcomers for high-paying jobs. That influx puts a squeeze on Seattle’s housing market, often driving out lower-income, long-term residents.

Some members of the Seattle business community have pushed back on the employee-hours tax. More than 180 business leaders wrote a letter to the Council on Tuesday, asking lawmakers to reject the new $150 million tax proposal.

Last winter, the Seattle Metropolitan Chamber of Commerce mobilized its members to write letters to the Council questioning its methods for fighting homelessness. Ninety-one business leaders, organized by the Downtown Seattle Association, also sent a letter to the Council arguing that the tax is not an appropriate solution to the city’s homelessness crisis.

Documentary filmmaker and Seattle resident Christopher Rufo has penned editorials in the Seattle Times and Crosscut this month in opposition of additional taxes. Here’s what he told GeekWire this week:

“Amazon is the most innovative company in the world and has created 40,000 high-wage jobs in Seattle. They’ve done far more good for our city than our incompetent City Council.

Sadly, instead of learning from the HQ2 debacle, Councilwoman Sawant and her cronies seem intent on chasing the entire company out of town. It seems they would prefer to turn South Lake Union back into blight and send Amazon’s tech workers into city-funded homeless encampments.

The reality is that we already spend $1 billion a year on homelessness in Seattle, but have seen no improvement over the past decade. But instead of taking responsibility for their failures, our City Council simply looks for another scapegoat and asks taxpayers for more money.

Don’t be fooled: we don’t have a funding problem in Seattle, we have a leadership problem. It’s time we send Comrade Sawant and her socialist cronies packing.”

The council is expected to discuss the new head tax proposal at Wednesday’s council meeting. A vote could come as soon as May. Sawant and the Affordable Housing Alliance plan to organize a protest at Amazon’s Spheres on April 10 at 5:30 p.m.

https://www.geekwire.com/2018/amazo...tle-city-leaders-voice-support-150m-head-tax/
 
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Lol...250k a year is not rich.

Implement a voluntary basis state tax there.
Let's see if Washington's liberals put their money where their mouth is.
 
And when the "rich" move to someplace else.
 
Why don't they just do property taxes like every other municipality in the world? Oh wait, that wouldn't let everyone know how virtuous they are. Never mind.
 
Washington state has the most regressive tax system in the nation. We need a state income tax combined with relief on sales, property and gas taxes.

Someone at the poverty level pays nearly 7 times the state tax rate of someone in the top 1%.

17% for the poor to 2.5% for the rich. By comparison, the percentage spread in Alaska is 7 percent and 2.5 percent; Idaho, 8.5 percent and 6.4 percent, and Oregon, 8.1 percent and 6.5 percent.
 
Why would the rich move over a 2.25% tax that would be used to lower their federal taxable income?

Depends if they see this as just the start of things to come and how it truly affected them.
 
Lawsuit Says Seattle’s ‘Tax-the-Rich’ Measure Violates State Constitution
Supporters of income tax say a court ruling in favor of it will pave the way for state to follow
By Zusha Elinson | Aug. 9, 2017​

BN-UP923_38Qr6_M_20170809173707.jpg

A woman responds to a speaker at a Seattle City Council meeting about a new income tax on the wealthy on July 10. A lawsuit filed Wednesday alleges the measure violates restrictions on cities to impose such taxes. PHOTO: ELAINE THOMPSON/ASSOCIATED PRESS


A new tax-the-rich measure in Seattle was hit with its first legal challenge Wednesday.

The new Seattle measure, passed by the city council in July, would impose a 2.25% tax on any income over $250,000 or above $500,000 for couples filing jointly. It is expected to impact about 9,000, or 2%, of the city’s taxpayers.

A lawsuit filed by the Freedom Foundation, a conservative think tank, on behalf of 19 Seattle citizens, alleges the measure violates the state constitution as well as restrictions on cities to impose such taxes. A separate group called the Opportunity for All Coalition, founded by Seattle venture capitalist Matt McIlwain, filed a lawsuit later in the day.

Backers of the tax welcome the suits, because they believe a court ruling in favor of the tax will pave the way for a statewide income tax.

The battle in the state courts could lead to a fundamental change to the unique politics of Washington state, a liberal-leaning state with a longstanding aversion to taxing income.

A similar measure lost in the capital city of Olympia last year, and a tax-the-rich statewide initiative was voted down in 2010.

Washington is one of seven states in the country, including Florida, Texas and Wyoming, without an income tax.

The last time voters passed a graduated statewide income tax in Washington it was struck down by the state Supreme Court in 1933 as unconstitutional. The state constitution requires property be taxed at a uniform rate, which the court said applied to income in turning down the tax.

“This tax is illegal and we are confident an independent judiciary is going to uphold the law, is going to uphold 100 years of precedent,” said David Dewhirst, litigation counsel for the Freedom Foundation.

Seattle City Attorney Pete Holmes said he believes city will be able to persuade the state’s top court that the 1930s decision was in error. The state Supreme Court’s attention to current events in recent years, including a ruling that the state was failing to adequately to fund public schools, means the court could be more receptive to taking another look at the income tax issue, he said.

“We’ve acknowledged that this a tenuous legal path forward, but we nonetheless believe it’s viable,” said Mr. Holmes.

David DeWolf, a Gonzaga University School of Law professor emeritus, said the state’s highest court would now be more open to an income tax measure, provided it was statewide and applied to a broader swath of the population, not just a few wealthy residents.

But Mr. DeWolf predicted courts would be skeptical of the Seattle tax because of the restrictions on cities imposing taxes and because of how many people are exempted from paying.

“When you impose a tax it needs to be uniform,” he said.

The Seattle economy is booming with unemployment hovering around 3%, and the city has a balanced budget. Yet as housing prices have soared, homelessness has too.

The tax would bring in about $140 million every year for the city. The money would be used to fund affordable housing, education and transit services, and replace federal funding that might be lost because of federal budget cuts.

https://www.wsj.com/articles/lawsui...olates-state-constitution-1502315553?mod=e2fb

This is a Trojan horse if I have ever seen one.

Washington state has it written into its constitution that you can't have income taxes.

So, if you wanted to tax the rich, it would be better to do so on property taxes, or some other avenue, that is not protected by the state constitution.

This is a ploy to set legal precedent for a state income tax, without amending the state constitution.
 
This is a Trojan horse if I have ever seen one.

Washington state has it written into its constitution that you can't have income taxes.

So, if you wanted to tax the rich, it would be better to do so on property taxes, or some other avenue, that is not protected by the state constitution.

This is a ploy to set legal precedent for a state income tax, without amending the state constitution.



You act like the care about the constitution.
 
This is a Trojan horse if I have ever seen one.

Washington state has it written into its constitution that you can't have income taxes.

So, if you wanted to tax the rich, it would be better to do so on property taxes, or some other avenue, that is not protected by the state constitution.

This is a ploy to set legal precedent for a state income tax, without amending the state constitution.
From what I read it said the constitution states that property tax must be uniform and that the Supreme Court of the State in 1933 ruled that income tax was a form of property tax basically and that it must be uniform also.
 
This is why there should be an electoral college for states, so loonies in Seattle can't control policy for the entire state.
 
And when the "rich" move to someplace else.
Most rich people with good jobs and/or profitable businesses aren't going to move for a 2.25% tax.

If anything, people who were going there may not but honestly that is not an unreasonable state tax and still lower than a lot of good places to live.

Edit: I should also add that I am not familiar with their other taxes, but the state tax in isolation is reasonable.
 
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