On July 15, a division of the Washington Court of Appeals issued a surprising ruling teeing up for the State Supreme Court an opportunity to reconsider a longstanding constitutional precedent prohibiting nonuniform taxes on income.. Things are supposed to be bigger in Texas, but state income tax rates are an exception. That could change though, as the Seattle City Council this week passed a local ordinance to enact an income tax on Seattle residents. While not the sweeping outcome that progressive tax reform activists desired when they drew up this legislation, the ruling does clear the way for a new progressive revenue source–and at a time when Seattle badly needs it. “If the State or the Cities were to just shrink public services because of lack of funding, then they’re sort of just doubling down on the impacts of the depression and they’ll just make it worst and last longer.”. Income tax forms: The State of Washington does not have a personal or corporate Income Tax. Grocery stores are exempt from the levy, a talking point for head tax opponents fearing mass layoffs of cashiers and others back then. “We need a progressive income tax more than ever,” said Katie Wilson, general secretary of the Seattle Transit Riders Union. Image: Photo by Giorgio Trovato on Unsplash. Instead, Washington imposes a “business and occupation” tax based on corporations’ sales or products’ value. While the idea to enact an income tax has been floated in the state legislature and at the ballot box over the years, none of the proposed measures have passed. On the flip side, in the short term it is legal to use public funds to assist households making up to 80% of median income, which in Seattle is around $60k/year for a single person and $88k for a family of four – so the city could do a flat tax, then us a chunk of the revenue raised to make every household making less than 80% of median income whole (or better) with cash assistance for food, rent, or transportation (for example). Kioko says she hasn’t come across a tax quite like this one in her years researching public finance and budgeting. There are no income taxes in Washington State. But that doesn’t mean the JumpStart levy won't affect people from all economic classes. “As we address the health crisis, we must also look ahead to ease as much fiscal pain as we can,” Governor Inslee said in a statement. With a new tax on jobs, its city council seems determined to make things even worse. Some of that revenue could returned to low-income households via rebate to make the impact more equitable. Which Neighborhoods Closed 2020 the Strongest in Seattle Real Estate? Even though the tax is only applied to high salaries, businesses will naturally adjust costs elsewhere to compensate for their losses, transferring the levy’s toll to others. The state and local tax system would be perfectly adequate without being regressive. No income tax in Washington state Washington state does not have a personal or corporate income tax. Can Washington's New To-Go Cocktail Law Save Seattle's Bars? For our November meetup, Erica C. Barnett of Publicola was our guest. Authoritative. Provides a credit for income taxes paid to another state or local government. “Until we have that,” she says, “everything else is really going to be window dressing.”, 10/08/2020 While the cancellation of a planned raise for a higher-up may not engender mass sympathy, reductions in job opportunities for janitorial services and other contractors would. By Given the narrow margin, a challenge originating from state legislative action might fare better. Find out about License and Tax Administration . Zoe Sayler Kioko says she hasn’t come across a tax quite like this one in her years researching public finance and budgeting. This means that once you’ve finished your … For more than 80 years the Washington state Supreme court has ruled that income is property as defined by the Washington state constitution, which effectively prohibits a progressive income tax. Alaska has no state income or sales tax. Washington’s governor wasn’t shy about saying it Thursday: He thinks the state needs to spend more money to dig itself out of the hole caused by COVID-19. Tax-Rates.org – The 2019 Tax Resource “It's an interesting strategy to try and have a taxation on income, which is a big challenge for, not just Seattle, but for the state as well.” A challenge, in that a local or state income tax doesn't currently exist here. By He graduated from the Evans School of Public Policy and Governance at the University of Washington. Businesses with annual payrolls between $7 million and $99,999,999.99 will face a tax rate of 0.7 percent on the compensation of employees making $150,000–$399,999; the rate rises to 1.7 percent for employees making over $400,000. That’s not as good as a true progressive tax, but could in fact do a lot of good! Levies a 2.25 percent tax on individual and trust total income in excess of $250,000 ($500,000 for married individuals filing jointly). Liberals need to stop thinking they can spend and tax for pet projects. The statewide effort may taken longer than the City effort, but progressive advocates see it as a race with the effects of the encroaching recession and hope to forge ahead on all fronts. Affordable housing and pandemic relief are among the stated destinations for these funds, which could help compensate for coronavirus’s potential $300 million toll on the city budget. Photography by This tax violates several state laws and constitutional provisions. The region's regressive tax structure continues to be a thorn in the side of progressive politicians, forcing them to get, well, creative in their taxation legislation. The Urbanist serves to examine and influence urban policies by promoting and disseminating ideas, creating community, and improving the places we live. Nonetheless, the window for progressive tax reform may finally be approaching. Seattle Met “Seattle’s income tax is a tax on net rather than gross income.” The city taxes individual income above $250,000 at a rate of 2.2%, and annual income under that amount is taxed at 0%. By Most state governments in the United States collect a state income tax on all income earned within the state, which is different from and must be filed separately from the federal income tax.While most states use a marginal bracketed income tax system similar to the federal income tax, every state has a completely unique income tax code. Like residents, Washington businesses get to skip a state income tax. Flipping one state Supreme Court justice could be enough, particularly if Justice Helen Whitener, who Governor Inslee just appointed to the state Supreme Court, is more of the progressive mindset and open to revisiting the unfortunate 1930s state precedents that, unlike in most other states in the union, classify income as property (hence the flat tax rate requirement capped at 1%). The underlying problem is that Washington’s tax system–which is ranked the most regressive in the nation–is not just inequitable and hard on the poor but also brittle and highly exposed to economic shocks and recessions. The COVID-19 pandemic and local government lockdowns economically decimated Washington state in March, with Seattle hit especially hard in the early days of the virus’s spread. The Urbanist is a 501(c)(4) nonprofit. Kioko says that a “clever” part of the legislation is that its tax rates are low enough to prevent bigger companies from uprooting; simply put, moving costs may outweigh the tax expense. Amber Fouts, 07/29/2019 Social services and equity efforts are often the first to be cut. John Burbank, executive director of the Economic Policy Institute–a progressive think tank instrumental in crafting the bill and its legal defense–estimates a 1% income tax could raise $400 million in Seattle. 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