Seattle is on its way to getting its own income tax. Yesterday, an ordinance to institute a tax on high-income earners passed out of Council chambers and appears headed for approval by the Mayor. Separate legislation also passed to update the City’s Rental Registration and Inspection Ordinance and revise an agreement with the Seattle Housing Authority on terms for redevelopment of Yesler Terrace.
City Income Tax Passes
A new income tax unanimously passed by the Seattle City Council on Monday. The income tax would affect high-income earning households in the city. The income tax will be set at 2.25% of gross income, which kicks in at income above $250,000 for single individuals and $500,000 for married couples. The income tax will be implemented in 2018 capturing all income during that first year and then becoming due for tax payment in 2019 during the regular April 15th tax day. The income threshold for taxation will generally go up year to year with inflation.
The income tax is expected to apply to only about 5% of Seattle’s households, or some 8,500 households. Revenues from the tax are anticipated to be $140 million in the first year, though the tax will be somewhat volatile due to income changes over time. Proceeds from the tax are to be focused into six key areas:
- Lowering the burden of property taxes and other regressive taxes;
- Addressing the homelessness crisis;
- Providing funding affordable housing, education, and transit;
- Replacing federal funding potentially lost through federal budget cuts, including funding for mental health and public health services;
- Creating green jobs and meeting carbon reduction goals; and
- Administering and implementing the income tax.
During the Council meeting, Councilmember Lorena González offered an amendment to the bill. The amendment centered on reducing Business & Occupation (B&O) taxes in the city and how they might be one of the taxes reduced. There was disagreement by some Councilmembers on the broad scope of the amendment, but Councilmember González said that B&O tax reductions should be focused on small local businesses. The amendment passed on a 6-3 vote.
The law is widely expected to be appealed and end up in court–though proponents expect to successfully prevail under the state’s law prohibiting net income taxation since the legislation taxes gross income. Proponents also believe that the State Supreme Court will rule favorably on the tax measure with regard to tax progressivity.
Seattle Income Tax Comes Into Focus
