Seattle Mayor Approves Controversial City Income Tax

Seattle, Washington’s mayor, Ed Murray, has signed an ordinance establishing a citywide income tax on high earners. Challenges are expected, however, in a state that is one of nine in the country that does not have personal income tax.

“Seattle is challenging this state’s antiquated and unsustainable tax structure by passing a progressive income tax,” Mayor Murray said. “Our goal is to replace our regressive tax system with a new formula for fairness, while ensuring Seattle stands up to President Trump’s austere budget that cuts transportation, affordable housing, healthcare, and social services.”

Anyone earning more than $250,000, and joint filers earning more than $500,000, will have to pay a 2.25% income tax on total income. The tax begins on income earned after January 1, 2018 and will be adjusted annually by inflation every year after. The tax will be due every April 15. The ordinance does not currently provide for the withholding of city income tax by employers.

“This is a fight for economic stability, equity, and justice,” Mayor Murray said.

Opponents of the tax cite a state law prohibiting municipalities from establishing local income taxes. “A county, city or city-county shall not levy a tax on net income,” the law reads. Supporters of the tax say it is not on net income but rather total income, which is defined as income before deductions, adjustments, or credits taken on the federal Form 1040, shown on line 22 of Form 1040, line 15 on Form 1040A or line 9 of Form 1041.

The non-profit think tank The Freedom Foundation has said they intend to file suit opposing the income tax ordinance.

Several attempts at a statewide income tax have been rejected in Washington in recent years, and voters in Olympia shot down a 1.5% local income tax to fund college tuition in 2016.

For more information, please contact a Caroprese tax expert.

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