Seattle City Council To Study Possible “Millionaires Tax”

By Darren Smith, Weekend Contributor

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The Seattle City Council is considering a resolution directing the city Law Department to investigate the possibility of imposing an excise tax on individuals having incomes in excess of one million dollars.

Washington has no state income tax. Seattle’s pursuit of this might be attractive to many voters who view income tax as a form of balance against what is considered by some to be the regressive nature of Washington’s taxation system. Yet voters over the years have resorted to the voting booth to end the discussion among some politicians who have tried to enact similar measures. The city garnered much national attention by working toward a controversial fifteen dollars minimum wage.

Seattle might have a difficult task if it chooses to enact such an ordinance as the State Supreme Court declared income taxes of this type to be unconstitutional.

The text of the measure being considered by the City Council reads:

Statement of Legislative Intent:

Council requests the Law Department research the legal possibilities that exist to impose an excise tax on annual individual or \ household earnings in excess of $1,000,000. This will prepare council and advocates of progressive revenue sources to draft legislation to institute progressive measures like a millionaires tax in 2016.

It is intended to mitigate the effects of Washington State’s tax structure, the most regressive in the United States, which forces the poorest 20% of the population to pay 16.9% of their income in local taxes while the wealthiest 1% pay only 2.8%. A excise tax on households earning $1,000,000 or more per year could generate revenue to address Seattle’s affordable housing crisis, expand human services, which are currently underfunded and facing cuts, and fund mass transportation projects. Households earning less than $1,000,000 per year would not be affected.

That could prove difficult to enact.

When the matter was being considered by the legislature, in the 1970’s the Washington Attorney General’s Office issued an opinion that such laws are most likely unconstitutional.

… [The] “uniformity” clause of Article VII, § 1 (Amendment 14) which states that:

“. . . All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax . . .”

Moreover, the term “property” as thus used is expressly defined in this section of the constitution to mean and include,

“. . . everything, whether tangible or intangible, subject to ownership. . . .”

By reason of this definition, the Washington supreme court has on several occasions declared both individual and corporate income to constitute a class of property so as to be subject to this constitutional requirement of uniformity. See, Power Inc. v. Huntley, 39 Wn.2d 191, 235 P.2d 173 (1951); Jensen v. Henneford, 185 Wash. 209, 53 P.2d 607 (1936); and Culliton v. Chase, 174 Wash. 363, 25 P.2d 81 (1933). Furthermore, because of this requirement, the court in each of these three cases struck down as unconstitutional the income tax laws which were there involved; chapter 10, Laws of 1951, Ex. Sess., chapter 178, Laws of 1935, and chapter 5, Laws of 1933.

Since the Seattle proposal would apply to incomes in excess of one million dollars, it will be difficult to bypass constitutional constraints. In order to effect such a change the state constitution would need amending, something highly unlikely considering the unpopularity of an income tax among voters.


Seattle City Clerk’s Office
Washington Attorney General’s Office, Opinion on Income Taxation, December 26, 1974

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79 thoughts on “Seattle City Council To Study Possible “Millionaires Tax””

  1. And lest anyone fall for the notion that we live in a feudal society where wealth stays in the family, let me enlighten you:

    According to the paper, “Family, Education, and Sources of Wealth Among the Richest Americans, 1982—2012,” by Chicago Booth Professor Steven Neil Kaplan and Joshua Rauh of Stanford, about 70% of the uber rich (vs the merely rich) started their own business. Also, the vast majority came from the poor and middle class.

    And, I’m just wondering, does anyone insist on paying their landscaper more than what he asks? What about when you get your house remodeled, go to the dry cleaner, or anything else where you pay someone for a service? Do we all act like “evil rich people” and get bids for our remodel, finding the best quality for the lowest price? We should be so ashamed!

    I have a great idea. I think landscapers aren’t paid enough. I will now enact a law that will double their wages. And then I will call the middle class heartless who cut their own lawns.

  2. Paul and Karen,
    I believe we have some new sockpuppets. With comments that grubered, I wouldn’t want anyone to know I said them either.

  3. Karen, most rich people inherit their money; they don’t sweat blood working for it as you describe. The rich today pay their workers as little as they can which accounts for the gross income inequality in this country. If you are paying a lot in taxes you must have a huge income. The rich and corporations have all sorts of ways of avoiding tax. The top .1% of the population has more wealth than the bottom 90%. The bottom 60% of the population gets all of 2% of national income. The taxes on the rich can’t be too confiscatory.
    I hope the Seattle city council finds a way to pass this measure. If the millionaires leave, so be it. Who needs those blood sucking parasites anyway.

    1. Tricia – actually more people earn their millions than are gifted it. But your envy is showing.

  4. to Karen S…
    When your husband was working so hard establishing his business, was he making 1,000,000 per year? Perhaps his taxes were so high at that time to make sure all the million per year people could keep most or their money. I would think that struggling small business people would welcome a tax on the big earners so their taxes can be kept lower… and have good schools so that they would have better people to hire.

  5. Darren, I’m a gambler and I would have put big bucks you had a hand in fixing a horrible problem. Your humility is very impressive. Thanks for “admitting” your involvement. “It’s amazing what can be accomplished by a group when no one cares who gets the credit.”

  6. Darren – thanks for fixing the spam filter! It was beginning to feel like you had to sacrifice posts to the Vortex of Doom to appease Word Mess.

  7. Bruce asked:
    “is the tax based on gross income?”
    That is a good question. I was not able to locate if this was sought by the city council or not but that is very relevant.

    For reference purposes, Washington has several excise type taxes relating to businesses. One is the Business and Occupation Tax, another is the Excise tax on goods that could produce litter such as groceries, beverage containers etc. Both of these are charged on sales price not net profit.

    The danger in having a gross income excise tax is some investors or individuals have high income pre-tax but lower net income. The case of commercial and residential lease properties is a good example. In the first few years if the properties are mortgaged a great expense is formed in the form of Interest via amortization, that has a significant effect on reducing net income. Federal income taxes do not generally apply on gross income because the taxation could exceed the net income.

    Furthermore, there are times where individuals have net losses and an excise tax on gross earnings could be crippling.

  8. Civility seems to have improved as well. I wonder how much of that is attributable to the midterms having concluded.

  9. Nick wrote:
    “There have been virtually no eaten comments for weeks now.”
    When Professor Turley was on holiday, I found several issues with the spam filter’s configuration that were producing false positives. I corrected these and it seems to have worked.

  10. Darren,
    Has the City of Seattle suddenly developed a revenue problem or have they simply run out of others people’s money?

  11. The idea that somehow we shouldn’t tax millionaires because the whole economy would collapse is absurd. The top tax rate was about 70% from 1940-1980, aka during the USA’s greatest period of economic growth. Reagan cut the rate to 50% in the early 1980s. What’s it now, 37%? And yet the economy has been rather sluggish since 2008. I blame lazy millionaires.

  12. “I think we should cap wealth @ 3 million dollars. Anything over that should be distributed to the underachievers in our country.”

    No, I think that’s rather low. I’d set it at $100 million. So you’re safe Nick.

  13. “Sec. 47. And thus came in the use of money, some lasting thing that men might keep without spoiling, and that by mutual consent men would take in exchange for the truly useful, but perishable supports of life.

    Sec. 48. And as different degrees of industry were apt to give men possessions in different proportions, so this invention of money gave them the opportunity to continue and enlarge them: for supposing an island, separate from all possible commerce with the rest of the world, wherein there were but an hundred families, but there were sheep, horses and cows, with other useful animals, wholsome fruits, and land enough for corn for a hundred thousand times as many, but nothing in the island, either because of its commonness, or perishableness, fit to supply the place of money; what reason could any one have there to enlarge his possessions beyond the use of his family, and a plentiful supply to its consumption, either in what their own industry produced, or they could barter for like perishable, useful commodities, with others? Where there is not some thing, both lasting and scarce, and so valuable to be hoarded up, there men will not be apt to enlarge their possessions of land, were it never so rich, never so free for them to take: for I ask, what would a man value ten thousand, or an hundred thousand acres of excellent land, ready cultivated, and well stocked too with cattle, in the middle of the inland parts of America, where he had no hopes of commerce with other parts of the world, to draw money to him by the sale of the product? It would not be worth the enclosing, and we should see him give up again to the wild common of nature, whatever was more than would supply the conveniencies of life to be had there for him and his family.

    Sec. 49. Thus in the beginning all the world was America, and more so than that is now; for no such thing as money was any where known. Find out something that hath the use and value of money amongst his neighbours, you shall see the same man will begin presently to enlarge his possessions.

    Sec. 50. But since gold and silver, being little useful to the life of man in proportion to food, raiment, and carriage, has its value only from the consent of men, whereof labour yet makes, in great part, the measure, it is plain, that men have agreed to a disproportionate and unequal possession of the earth, they having, by a tacit and voluntary consent, found out, a way how a man may fairly possess more land than he himself can use the product of, by receiving in exchange for the overplus gold and silver, which may be hoarded up without injury to any one; these metals not spoiling or decaying in the hands of the possessor. This partage of things in an inequality of private possessions, men have made practicable out of the bounds of society, and without compact, only by putting a value on gold and silver, and tacitly agreeing in the use of money: for in governments, the laws regulate the right of property, and the possession of land is determined by positive constitutions.” John Locke’s Second Treatise of Civil Government

  14. “That is why I basically am just patting you on the head and giving you a cookie. It’s a way of dismissing you in a kind way, so as not to hurt your feelings.”

    Condescension! What a great way to promote civility.

  15. Paul:

    Don’t eat the cookie. There’s something in it. Something not good. Be very afraid. Run away, run away.

  16. There should not be an inheritance tax. There should be no inheritance. All assets of a millionaire should go to the underachievers in this country.

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