You may have missed recently that Seattle is planning a new personal income tax within it’s city limits. The only problem? It’s the only income tax that will be collected in the entire state.
Well, “only” in terms of taxes doesn’t really fit since there never seems to be “only” one problem when it comes to taxes. But Seattle, thanks to its City Council’s unanimous vote, created this measure “as much to raise revenue as to open a broader discussion about whether the wealthy pay their fair share.”
This type of discussion is nothing new. Since before the 2016 Presidential Election, income inequality, minimum wage and taxation have all been tied together in a confusion mess (see what I mean about not “only” one problem?) that has engulfed modern politics. And it doesn’t appear to be going away any time soon.
However, even for those who are not libertarian or liberty minded, this move should give pause to any sane individual. The 2.25 percentage tax on those who make $250,000 in single income or $500,000 in joint income is supposed to raise $140 million dollars. This becomes a problem because they are using the income tax to (you guessed it) help with tax relief for others. Meaning, they’re collecting taxes to pay for taxes. They are creating a governmental burden to pay for a governmental burden.
This is exacerbated by the personal income tax in Seattle being in violation of the 1984 law that prohibits “a county, city, or city-county from levying a tax on net income.” Which means, local and state governments are probably going to battle out the legality of this move, which will cost taxpayers in court costs.
One of the biggest issues is the infrastructure around this new measure. Since Washington has no income tax and hasn’t since 1984, there is no existing department to handle the paperwork associated with it. This means that Seattle will have to create what has been referred to as a “mini-IRS.” Now, I know the term “mini-IRS” makes every Libertarian throw up in their mouth a little, but don’t worry, it gets worse. It is predicted that it will cost Seattle $5 million dollars to annually run this new department, after an initial cost of $13 million dollars to set up, plus any other expenses that might arise. Which means, it could be more. They’re already in the hole before they even get things going.
This, of course, is predicted on the premise that everything runs smoothly and no hiccups occur. Personally, my experience with massive bureaucracy is anything but “smooth.”
Seattle is, of course, divided on this issue. One of the biggest problems people cite is that it will drive jobs outside the city limits where there is no income tax in the rest of the state. Others argue that it will only drive the wealthy individuals, not their companies, out since it is a personal income tax. It remains to be seen.
We’ll keep you updated as things occur. Live free!