Taxes

SEATTLE — Cities in Washington can enact their own income taxes, a state appellate judge ruled Monday, overturning a law against such practices that dates back more than 30 years.

But the income tax that Seattle tried to impose in 2017 is unconstitutional, the judge said in the same ruling, meaning the city must go back to the drawing board to create a more uniform taxing system.

The Seattle City Council imposed its tax two years ago to collect 2.25 percent on individual incomes of $200,000 or more, and $500,000 or more for households. The tax was designated for programs like transit services, homeless assistance, housing affordability and reduction in property and sales tax. 

But Appellate Judge James Verellen said a 1933 Washington Supreme Court ruling demands that taxes be levied uniformly. Seattle’s tax, often described as a “wealth tax,” violates that requirement because it targets only high earners.

But the city can have another bite at the apple: Verellen’s finding strikes down a 1985 state law that forbids cities from collecting income tax. Unless the state Supreme Court rules differently when Seattle appeals, that means any Washington city could now set its own tax on residents’ earnings.

“The City has always recognized that ultimately the Supreme Court is the proper place to overturn the bad precedent holding an income tax is a tax on property,” Seattle City Attorney’s office said in a press statement. “We intend to petition our Washington State Supreme Court for appeal.” 

Jefferson Robbins: 679-7013

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