On Monday, The Seattle City Council unanimously approved legislation that creates a city income tax on high-income households to move Seattle toward a fairer, more progressive tax system. According to officials, the legislation, Council Bill 119002, is intended to reduce regressive taxes such as property taxes, and finance priorities like addressing the homelessness crisis and offsetting federal budget cuts. The legislation will place a 2.25% tax rate on income over $250,000 year for individuals, or $500,000 for married couples filing jointly. The tax will not affect any income earned below those thresholds, and is estimated to generate $140 million per year.
“Seattle is a progressive city, but you wouldn’t know it by looking at our regressive tax structure, and that includes the taxes paid by small businesses,” said Councilmember Lisa Herbold, co-sponsor of the legislation. “When our poorest households are paying 16% of their income in state and local taxes while our highest earners are paying only 2.4%, we have a very clear problem. Today we are taking a step in the right direction, toward tax fairness.”
The legislation requires the funds be used to:
- lower the property tax burden and the impact of other regressive taxes;
- replace federal funding currently received by the City that may be lost due to federal budget cuts;
- provide public services such as housing, education, and transit; creating green jobs and meeting carbon reduction goals; and,
- implement and administer the tax.
According to a June SurveyUSA poll commissioned by KING-TV and KUOW, 66% of polled Seattle voters support a high earner income tax.
Unless challenged in court, the income tax on high earners will apply to income earned after January 1, 2018. Collection of 2018 taxes will begin April 15, 2019. After the Mayor signs the legislation into law, the City’s Finance and Administrative Services Department (FAS) will undergo a rulemaking process for implementation and administration of the tax. FAS will report back to Council with a finalized set of rules by November 15, 2018.
“I recognize there may be challenges, but as your City Attorney I know we have assembled an outstanding legal team to craft the best legislation possible and defend it,” said City Attorney Pete Holmes.
