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Seattle Passes City-Level Personal Income Tax
Washington is one of seven states that does not impose a personal income tax. On July 10, 2017, the Seattle City Council approved an income tax on its wealthy residents.
The tax applies a 2.25 percent levy on total income above $250,000 for individuals and $500,000 for married couples filing jointly. The tax on high earners will apply to income earned after January 1, 2018. Collection of 2018 taxes will begin April 15, 2019. A finalized set of rules is scheduled for delivery by November 15, 2018.
If the tax is determined to be constitutional, Seattle’s income tax returns are due on April 15, 2019.
Lawsuits will almost certainly emerge against the tax due to the state constitution requiring all taxes in Washington to be uniform within a class of property. On multiple occasions, various forms of income tax have been ruled to be unconstitutional. Washington Supreme Court decisions have clarified that “income” is property and that any tax on property must be uniform. On its face, Seattle’s income tax violates the constitution.
In addition, state law blocks counties and cities from imposing a tax on net income. Proponents of the city-level tax claim that it taxes “total income” rather than “net income,” and should meet the requirements of the state law. Opponents disagree, arguing that the tax is unconstitutional and illegal regardless of how it is described.
CLA will continue to monitor the potential application of this new income tax.