Virgin on Business: Citizens, Beware!

Old and new taxing bodies are getting more creative and ever more opportunistic.

August 2, 2016

Bill Virgin


For decades, elements of Washingtons political class have longed for nay, lusted after an income tax, this state being among the seven currently without one.

Washington voters have not shared the ardor for adding yet another tax, voting down proposals seven times, most recently in 2010.

But obsession is not easily deterred, and the pro-income-tax forces have kept up an unceasing drumbeat of lobbying for their cause on the grounds that government needs the money, or that it would help punish the rich or it would be more fair or that its really for the children or just because.

Now proponents are making another run at the issue, but theyre altering their strategy. They might pull it off, and the contents of your wallet along with it.

Olympias City Council has been working on a November ballot measure that would establish a city income tax in response to a petition from an advocacy group. The original proposal would have imposed the tax on households with income of more than $200,000. The citys alternative proposes a graduated income tax on all households.

The money would supposedly be used to finance college tuition for Olympias high-school graduates, but thats a largely irrelevant point in this discussion. Olympia represents a beachhead for the pro-income-tax forces, much as SeaTac did for advocates of the $15-an-hour minimum wage. Win that first town, then see what other like-minded territories you can pick off.

The biggest objection to that strategy is that income taxes have long been regarded as illegal in Washington. But unlike the ban on local rent control, which some in Seattle are clamoring for, the income-tax prohibition rests not directly on statute but interpretation of law through state Supreme Court rulings.

Old rulings, at that. A 5-4 decision in 1933 held that a graduated income tax (which had been approved by voters) was unconstitutional because income was property and property was to be taxed uniformly. That view has figured in subsequent court rulings, but its still a hotly contested one. Given the state Supreme Courts current political leanings and its recent activist penchant for assuming the duties of both the executive and legislative branches, as evidenced in the McCleary school-funding case, opponents of an income tax ought not to feel confident that the legal bulwark will hold.

If it doesnt, Seattle will be filing for its own municipal income tax about one millisecond after Olympias is cleared, to be followed by every village and hamlet with taxing authority. Once word filters north about what Olympia is up to, maybe Seattles politicos wont wait even that long, choosing to join in the challenge.

Thats not good news for Washingtons beleaguered taxpayers, who, in addition to their usual objections to taxes once established they never go away and they never shrink, the money wont be spent wisely, its not as if were swimming in money they can add such complaints as the proliferation of tax increases, new taxes and new entities asking for them.

One recently discovered trick is to spin off a function or department as a separate body with its own taxing authority. Renton tried this with its fire department and got voters to approve a new fire district. University Place in Pierce County tried it with its parks and recreation operations, but lost.

Sound Transit, meanwhile, goes to voters in November not just with increases in sales and motor-vehicle excise taxes but a new property tax. King County Executive Dow Constantine, who also chairs Sound Transit, wants the Legislature to remove the 1 percent cap on annual increases in property-tax revenue.

The Legislature is already in the middle of tax fights over McCleary, so an income tax is merely one more incendiary issue. Should lawmakers decide they, too, want a cut of the action and they approve a state income tax, they wont have to look far for an easily remembered name for the legislation. They could call it the Tim Eyman Job Security Act.

Monthly columnist Bill Virgin is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.