Less than a week after former mayor Mike McGinn urged the City Council to pass a city income tax, Seattle mayor Ed Murray jolted the crowd watching a North Seattle candidate forum Thursday night, when he announced his plans to propose the progressive tax in the next several weeks.
"Now bear with me," Murray said. "It's too soon to cheer. It's going to be challenged in court."
Activists are pushing for a 1.5 percent tax on adjusted gross income above $250,000. (There's also been some discussion about raising that threshold, they said.) They want the legislation to make it to City Council before July 4, and council member Lisa Herbold is taking the lead on drafting a timeline for the resolution.
Council can then pass the law without a citywide vote, which will then get challenged. If council does pass the legislation, the revenue likely wouldn't be collected for another couple years.
"There's still a lot of moving parts to the legislation right now," council member Rob Johnson said.
Johnson said the council was considering progressive revenues, but he wasn't expecting the mayor's proposal for an income tax. "I had always been an advocate for starting with a capital gains tax," council member Rob Johnson said, after previous conversations with legal counsel.
The advocates from Trump Proof Seattle—which includes the Neighborhood Action Coalition, Economic Opportunity Institute, and Seattle Transit Riders Union—began lobbying for the city income tax shortly after the November general election when U.S. president Donald Trump won. They expect the income tax to be challenged in court, likely from the right-wing Freedom Foundation (which is funded by the Koch Brothers). The legislature has a clear ban on local income taxes.
"What we want is to bring it to the state Supreme Court for review and reverse their decisions from 1935 and 1933," said John Burbank, the Economic Opportunity Institute director who helped push for a statewide income tax in 2010. "That will then open up the ability for the city to implement this tax."
Reversing that decision would provide legal bearing for a local income tax. It could potentially also foster up more support for a statewide income tax, though that's a much larger undertaking. Advocates point out that Washington is just one of seven states that don't have an income tax. A study using 2015 data showed the poorest 20 percent of the state—less than $21,000 in annual family income—pays 16.8 percent of their income to taxes. The most wealthy 1 percent—$507,000 or more—pays only 2.4 percent.
"It's really exciting that the mayor has decided to pick up the banner saying that he supports this," said Daniel Goodman from the Neighborhood Action Coalition on Friday.
Outside Seattle, it's often political suicide to even mention an income tax; Republicans are obsessed with pointing out that most voters statewide don't want this. Since the Supreme Court ruled it unconstitutional in the 1930s, voters struck down statewide income tax measures eight times. The last time it was tried in 2010, 64 percent of voters opposed it.
In Seattle, the city income tax has been an easy way to garner support on campaign platforms for years, including when council member Kshama Sawant urged a "millionaire's tax" in 2015. The city has passed a slew of taxes, six of them during Murray's term, and also voted in favor of the statewide income tax in 2010.
Murray is facing tough challengers this year in light of allegations of child rape against him, and clearly election season has elevated the income tax issue yet again. But city attorney Pete Holmes said he also believes an income tax could be more plausible now.
"This has been an issue that has been debated and discussed for years. ... I wouldn't say that Mayor Murray's interest is new as a result of that," Holmes said in an interview Friday. "It's a changing landscape legally in the state, and the case is not unlike the case for legalization of marijuana. In 2012 the planets aligned. It was time."
All the candidates who actually answered lightning-round questions supported Seattle implementing an income tax "as a test case" for the state Supreme Court, with the exception of Cary Moon. Moon said she instead supports a capital gains tax on householders earning $250,000 or more and closing tax loopholes on stock gains, but that the income tax proposal is just a distraction that would take years to run through the legal system.
At times implementing an income tax could create unintended consequences, said Justin Marlowe, a University of Washington professor of public finance and civic engagement—like tech companies or businesses being more reluctant to locate within the city and impeding economic growth. Other companies might cut wages or benefits as a response.
Big businesses like Amazon would be unlikely to leave Seattle, Marlowe said. The question is just whether smaller consulting or tech startups could be affected or turned off.
"I think that’s why this politically is a little more palatable, because Seattle's in a position where the value of companies is so great that they might be willing to tolerate that. ...[But] not everyone is Amazon or Expedia," Marlowe said. "When you’re out there competing for talent in the tech industry ... a percent or two can make a big difference."
Activists said it wouldn't be a problem in Seattle and some high earners, like tech and business employees, have been part of the discussions. And if some companies do move out, others are eager to take their place, said Ximena Velazquez-Arenas of the Neighborhood Action Coalition.
"We are changing what is considered normal in our state," Velazquez-Arenas said. "There's not a precedent until you create one."