While Seattle's legal challenges can be expected for Seattle’s new income tax on the wealthy, the outcome of an eventual legal challenge in Washington State’s supreme court is a “crap shoot.” So said Paul Guppy, vice president for research at the Washington Policy Center, with whom Spero News conducted an extensive interview. The spokes for the pro-free market organization was responding to the news that Seattle’s nine-member city council unanimously approved on Monday a 2.25 percent income tax on individuals who earn $250,000 per year or more, while it would impose that same rate on couples earning $500,000 per year or more. 

Guppy said that established law in the state is clear as to taxation, which Democrats and leftists consider to be among the most regressive in the nation. A uniformity clause in the state constitution, which is unique in the nation, means that income or real estate taxes must be uniform for all residents. Legal precedent is unfavorable to the new Seattle law, but courts may rule in its favor, he said.

On Monday, State Republican Chair Susan Hutchison stood outside of City Hall, enduring jeers from opponents who shouted her down as she called on Seattle’s citizens to resist the expected new income tax.

 

No free speech for conservatives

Protesters who favor the imposition of an income tax held bright red signs that read “Tax the rich,” which was followed by a check mark. Two other goals were on the signs: “$15 hour wage,” which was also followed by a check mark, and “Rent control,” which has yet to be accomplished in the progressive city. 

When Hutchison sought to make the point that introducing an income tax in Seattle may mean that state income tax would not be far behind, she was silenced by protesters who chanted: “Tax the rich! Tax the rich!” Guppy criticized the protesters for not affording “free speech” to Hutchison.

When the news hit social media, comments were rife. Commenting on the Seattle Times coverage on Tuesday, one critic of the tax wrote: “There they are again – the “give me free stuff” crowd spending their time where it apparently has the highest return – lobbying council members to take from others. I love the “tax unearned income” sign – written on cardboard, no less.  If returns on at-risk investments are “unearned,” how exactly would you characterize government handouts? A more appropriate sign would say something like, “let’s take from earners, investors, and savers, and give to me!” At least then it would be honest.”

Democrat Mayor Ed Murray and Socialist Councilmember Kshama Sawant have been prime movers in the income tax movement. Sawant, an immigrant from India, exulted on her Twitter account: “Today our movement won another victory, forcing council to tax the rich. Onward to rent control and housing justice! When we fight, we win!” Murray, who has also embraced the sanctuary movement tweeted: “Today our progressive city is boldly taking on our state's deeply regressive tax structure - one that's both unsustainable and unjust.”

In the exclusive interview with Spero News on Tuesday, Guppy said the income tax proponents say they want to tax the rich in the city, even though the wealthiest in the metro area, such as millionaires Paul Allen and Bill Gates, live outside of the city. “When we analyzed the actual proposal, it doesn’t do anything to make the tax system more fair. It doesn’t make it less regressive. Nobody is going to receive tax relief anywhere: no sales tax, property tax, car tax. Working people are going to pay the same high taxes to the City of Seattle that we’re paying now.”

Danger to civil liberties

Moving on to concerns for civil liberties, Guppy noted that Seattle will have to create its version of the Internal Revenue Service of the federal government.  He said that “The way they are going to enforce this is: how do they know who lives in this city? Who owes this tax?” Granted that the law specifies individuals who earn annually $250,000 or more, Guppy said: “They are going to go to the federal IRS and get income tax Form 1040 information on potentially everyone in the city.” This would mean that city bureaucrats would be able access to personal tax information, with citizens’ permission, Guppy said. “There is a very strong civil liberties concern about that. And in smaller communities: do you want your neighbor to know how much you make? The people who work for the city know people. It’s a much more local thing. It’s not like a faceless bureaucrat in Washington DC who knows how much money you make. It could be the city worker down the street from you. And leaking is a major problem in today’s world. Nobody believes the government can keep a secret.”

Guppy also expressed the concern that tax information could be “selectively leaked” by the city government about controversial people. He cited as an example that there were business-owners who were outspoken opponents of the $15 minimum wage increase. “Their businesses were picketed, they were criticized by name. You can imagine that if some hostile person were to obtain their IRS information, that would have come out, too.”  Guppy added, “Privacy protection is a big concern.”

Other cities in Washington State, Guppy said, are taking a wait-and-see attitude toward advancing their own income tax proposals because they know they will be challenged in court. However, he said that within a few years, the liberal state supreme court may “twist” state law so as to permit local income tax. As an example, he cited the decision by the US Supreme Court to rule in favor of Obamacare. He answered “yes” when asked whether the state supreme court could similarly rule in favor of local income taxes.

Precedents found in progressive assaults on charter schools

Guppy cited as an example of how the state supreme court has ruled in a partisan fashion was a ruling on the constitutionality of public charter schools. Opponents of charter schools, including the Washington Education Association of teachers, won a lawsuit when the State Supreme Court ruled in 2015 that the charter-school initiative’s funding violated the state constitution. The ruling shut down the eight charter schools in the state overnight. However, lawmakers passed a new law in March 2016 that funds those schools through lottery money. In February 2017, after weathering another court challenge, charter schools won a victory when a King County Superior Court judge ruled that plaintiffs in a lawsuit challenging Washington’s charter-school law did not demonstrate that charter schools are unconstitutional. 

In the case of the income tax initiative, Guppy that defeating it will depend on how “energetic” the Washington Republican Party is. Even so, he said that Washington’s voters have rejected a state income tax nine times on the ballot. Democrats and leftists, knowing of the unpopularity of a state income went to Seattle where they knew they could win at what he called “micro-politics” in a city controlled by Democrats. 

A test case for progressives

When asked whether Seattle is a test case for the rest of the country, Guppy said “Absolutely. It’s a sad test case in how political a state court system can become, and maybe I’m being too pessimistic, maybe these judges, as liberal as they are, have some integrity when the case gets to them. There are three strong arguments against the Seattle income tax should not be allowed. This is not a complex argument.” Guppy said that leftists and progressives are in a "clinical depression" over Donald Trump's victory in November 2016 and are seeking to win victories where they can. He said that the state constitution would prohibit the tax, the state legislature passed a law in 1984 prohibiting municipal income tax, and an 1889 law that prohibits any city from creating a tax out of “thin air.” All the same, he fears that in court, legal minds may find a way to circumvent the intent of the law.
 



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Martin Barillas is a former US diplomat and the editor of Spero News.

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