Tonight, DuPont city council moved to become the eighth city in Washington to ban a local income tax. Along with other cities, Yakima County also passed a ban. From DuPont City Council’s income tax ban:
“The City Council hereby declares that the imposition of a local income tax on businesses and residents of the Town of DuPont is prohibited. Such a tax would be in direct conflict with the high value the City places on promoting economic development through the attraction and expansion of financially healthy family employers. Small businesses are the backbone of our local, regional, state and national economy and it is imperative that the City does not put unnecessary obstacles in the way of their success. As such, DuPont City Council prohibits the imposition of a local income tax in the event that a local income tax is deemed legal and authorized by the Washington State Supreme Court or the legislature. of Washington State.
DuPont City Councilor Kevin Ballard, the sponsor of the local income tax ban resolution, told me:
“Resolution 21-025 opposing and banning the imposition of income tax on residents and businesses of the Town of DuPont was passed by an overwhelming majority this evening at our monthly council meeting. It was important for DuPont elected officials to fill the loophole created in the 2019 Kunath decision of the Division 1 Court of Appeals, which effectively overturned a 1984 court ruling denying cities the ability to impose a income tax. Kunath’s appeal decision opened the door for cities and counties to levy a flat-rate income property tax of 1% or less. DuPont is now one of many cities to strongly oppose any attempt to levy a property tax on the income of its residents and businesses in the future. ”
I testified at the town hall to encourage council to pass the income tax ban resolution and protect its competitive edge.
As for the economic benefit of having no income tax, for years the Washington Department of Commerce has made the state’s no-income tax policy a major selling point for its “Choose Washington” job promotion campaign. According to Commerce Department officials:
“We offer businesses competitive advantages that are not found in many other states. It does not include any personal or corporate income tax.
Former Washington State Treasurer Duane Davidson also agrees that not having income tax is a significant benefit to residents of the state. At the Washington Policy Center Solutions Summit in May 2019 in Spokane, Treasurer Davidson described the importance of avoiding an income tax and explained why not having one is a positive policy for Washington.
Local governments are passing these bans in response to a surprising 2019 Court of Appeals ruling that opened the door to a 1% local fixed income tax. This court decision said:
“Article VII, section 1 of our constitution, as interpreted by Culliton, considers income to be intangible, so an income tax is a property tax. Arguments to the contrary can only be resolved by our Supreme Court. In this case, the legislature granted Seattle the power to tax intangible personal property, including income, under either RCW 35.22.280 (2) or RCW 35A.11.020. RCW 36.65.030 prohibits any municipal deduction of a tax on net income. But the adoption bill of RCW 36.65.030 violated the constitutional prohibition in Article II, section 19 on legislation with more than one subject. Therefore, RCW 36.65.030 is unconstitutional and there is no legal prohibition limiting Seattle’s power to levy income property tax.
The state Supreme Court upheld this decision by not hearing the appeal.
Earlier this year, the legislature passed an unconstitutional capital gains tax (while refusing to prevent cities from taxing a local version) with the stated goal of supporters of using the courts to open the door to statewide income tax. Lawmakers also funded budget studies to convince Washingtonians to back an income tax, a taxpayer-funded commission now scouring the state to do the same.
In response to these continuing efforts to impose an income tax, the Herald of the Three Cities The editorial board wrote in September after Kennewick passed an income tax ban:
“If enough individual communities rise up against idea an income tax, perhaps lawmakers will stop trying to force the issue and instead focus on other tax reforms that would be more acceptable to the general public. . . Other cities are expected to give new impetus to this anti-tax campaign, including Richland, West Richland, Pasco, Benton City, Prosser and Connell. The more people who join the message, the more powerful it will be. “
One county and eight cities in Washington have now acted to ban a local income tax, including Battle Ground, DuPont, Granger, Kennewick, Moses Lake, Spokane, Spokane Valley, Union Gap and Yakima County. Yakima voters in November will also consider a charter amendment to ban a local income tax.
Other cities and counties should follow suit and signal to citizens and businesses that they will protect their economic competitive advantage by banning the imposition of a local income tax.
Washington cities decide to ban local income taxes