Seattle’s Income Tax on ‘the Rich’ Has Collateral Damage: The Poor
Seattle’s City Council made national headlines earlier this year when it enacted a city income tax aimed at “high earners.” Immediately, politicians crowed that they had planted a flag of “resistance” to the forces of “Trumpism.”
In a court hearing last week, the city defended its war on wealth against several legal and constitutional challenges. The briefing from both sides exposes an inconvenient reality for the levy’s defenders: its real, ultimate victims aren’t necessarily the plutocrats they claim to be targeting. In fact, just the opposite.
Some background: there are few precedents from other parts of the country for a city income tax of any kind, whether aimed exclusively at the successful or not. But for the Evergreen State, it is definitely a first-of-its-kind gambit. In fact, the city’s action was in direct defiance of the Washington State Supreme Court. That court has repeatedly held that the state’s constitution — specifically, its mandate for equal treatment of all private property — prohibits targeted income taxes, like Seattle’s decision to impose a 2.25% tax on total income in excess of $250,000 per year.
The courts cannot overturn the constitution — so, what is Seattle’s strategy? It is to convince a court to redefine a person’s income as something other than property, such that income would lose its constitutional protection.
Seattle’s legal briefing argues that income does not look like a typical piece of property. For many of us, income flows in and out of our possession without us ever really having a chance to capture it or hold it for longer than it takes to write a check. Thus, the city concludes that income should not be characterized as property.
But, in making this argument, the city’s legal team painted itself into a corner. You see, not only has the Washington Supreme Court recognized income as a form of property, there are decisions of the U.S. Supreme Court that agree. Thus, the city, in an effort to win by any means necessary, refined its argument to point out that those cases involved income derived from assets like bank accounts or real property. Seattle argues that income should only constitute property if an individual invests it in some hard asset, like stocks or real estate or a business. According to Seattle, the state constitution’s protection for property should not protect anyone who lives paycheck-to-paycheck.
The city’s argument in this regard is dangerously short-sighted. Ownership of the fruits of one’s labor is at the very heart of personhood. One need only recall Frederick Douglass’s account of being paid wages for the first time in his life: “To understand the emotion which swelled my heart as I clasped this money, realizing that I had no master who could take it from me — that it was mine — that my hands were my own, and could earn more of the precious coin… I was not only a freeman but a free-working man, and no master stood ready at the end of the week to seize my hard earnings.”
It’s no secret, though, that Seattle’s decision was spurred on by a sense of resentment against wealth and achievement. Indeed, supporters celebrated the proposal by waving “tax the rich” signs, while bill cosponsor, councilmember Kshama Sawant, declared that the decision to impose a “tax on Seattle’s rich” is part of a larger “battle” against wealthy citizens and is motivated by her belief that the “capitalist class” actively works to “undercut” the policies that she supports, and should be compelled to pay for them.
But at what cost?
The only way for the city to win this tax fight is to deprive the poor and middle class of the protections guaranteed by the state’s constitution. Doing so would have broad ramifications. Indeed, in the 1930 case, Culliton v. Chase (the very decision Seattle wants reversed), the Washington Supreme Court explained that, if income is not property, then “anyone can use our incomes who has the power to seize or obtain them by foul means.”
So, who has the most to lose? The poor and middle class of Seattle and the entire State of Washington. Once again, a “progressive” plan turns out, in practice, to operate more like the Sheriff of Nottingham than Robin Hood.
Brian T. Hodges is a senior attorney with Pacific Legal Foundation. PLF represents four Seattle residents in a constitutional challenge to Seattle’s income tax law.