City Hall

City Releases Its Income Tax Proposal

The council will hold a public hearing Wednesday morning.

By Hayat Norimine June 13, 2017

Mayor Ed Murray and council members Kshama Sawant and Lisa Herbold unveiled their income tax proposal on Monday, 12 days after the deadline that the resolution aimed for—it's a 2 percent tax on income above $250,000 for single tax filers ($500,000 for joint filers). 

Council arfqmm

That's larger than the 1.5 percent on adjusted gross income that Trump Proof Seattle originally proposed, and is estimated to raise $125 million for the city. The ordinance restricts uses of those funds to eliminating regressive taxes, replacing federal funding lost potentially through budget cuts, providing public services, and meeting carbon reduction goals.

"By replacing a system that relies too heavily on property and sales taxes with a progressive income tax, we can ease that burden and generate revenue to invest in Seattle priorities—human services, education, affordable housing and reliable transit," Murray said in a released statement. "This remains one of the major shortcomings of our city and state, and it is finally time to fix it.” 

Council member Lisa Herbold has said the decisions will be based on whatever provides the "strongest legal path forward." Yes, that did end up going beyond unearned income, and exempts certain sources of earnings—like any revenue, wages, or gains that came from outside the city, or income that's already been taxed by state or local jurisdictions. (And the legislation will get challenged—here's a reminder of what the legal fight will look like.)

It also seems to address the 1984 state statute that explicitly prohibits a "net income" tax. The ordinance said the city council has “all powers of taxation for local purposes except those which are expressly preempted by the state.”

"Any sources of income included in income reported on a resident taxpayer’s federal tax return that the laws of the United States prohibit cities from taxing, or that a court with jurisdiction to bind the city has determined cannot lawfully be included, shall not be included in a resident taxpayer’s total income," the ordinance reads. 

Herbold initially aimed for a July 10 deadline for a council vote. The city council will hold a public hearing on the income tax Wednesday. 

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