Overturned tax law could mean income taxes in Washington state

| Jul 26, 2019 | Uncategorized |

Businesses and residents of Washington may have to start paying more income taxes. A recent decision by the Washington state Court of Appeals has left the door open for a local income tax.

A 1984 law prohibited cities and counties from collecting net income tax. The court has now ruled that law unconstitutional. Lawmakers will try to decide if Washington needs a new law banning local income taxes.

Seattle’s income tax law

In July 2017, the Seattle City Council voted to tax the income of any individual who earned more than $250,000 per year and married couples earning more than $500,000. The law passed in Seattle despite the 1984 law banning cities and counties from collecting income tax. Lawsuits followed that led to appeals through Washington courts.

The courts found that the new law was unconstitutional. In 1933, the Washington Supreme Court ruled income as property. Taxes on property need to be uniform per the state constitution. The court said that Seattle’s tax law would not affect citizens uniformly.

Overturning previous ban

However, the court said the income tax law passed in 1984 was also unconstitutional. The bill it was part of had too many unrelated items in it to be constitutional. By overturning it, the court gave access to cities and counties to tax net income.

The future of income tax

Lawmakers will now have to decide on the future of income tax in Washington. Some lawmakers have already pledged to rewrite a ban on city and county income tax. Others, including those who helped support the Seattle tax, feel Washington state is ready for an income tax.

The debate remains ongoing. But for Washington state residents, the future may hold more income taxes.