The Socialist State of Seattle

CNBC just named the state of Washington as the top state for business in its annual scorecard on state economic climate.

Based on what is going on in the state's biggest city, Seattle, you have to wonder how much longer Washington will maintain that status.

Seattle's city council unanimously (9-0) passed an income tax of 2.25% on total income recently on individuals with more than $250,000 per year in income and married couples of $500,000 per year. The income tax will apply to no one else. Just the "rich".

This comes on the heels of the Seattle city council increasing the minimum wage in the city beginning in 2014 from $9 in stages to the progressive dream of $15 per hour. The minimum wage was first increased to $11 per hour and in January, 2016 was upped to $13 per hour. It is now at $15 per hour for large employers. That rate will eventually apply to all employers.

The early reports are in and, like many progressive ideas, the measure seems to be hurting those it is supposed to help. Workers in those low wage jobs saw have seen incomes fall (due to reduced hours) according to a recent University of Washington study.

In case you are curious, this is the political affiliation of the Seattle city council.

Credit: Wikipedia

In addition to the income tax and minimum wages increases, the city council has also passed a couple other prized progressive policies---a soda tax and a "secure scheduling ordinance" which mandates that employers set their employees' schedules weeks in advance and penalizes companies for changing them.

You may not be familiar with the platform of the Socialist Alternative party that Council member Sawant is affiliated with. Wikipedia describes it as "a Trotskyist political party active in the United States" which describes itself as "a national organization fighting in our workplaces, communities, and campuses against the exploitation and injustices people face every day".

A few of the issues that the Socialist Alternative Party is interested in per Wikipedia.

• The party advocates nationalizing the top 500 corporations and banks within the U.S. economy and running them under the "democratic management of elected representatives of the workers and the broader public."
• The party advocates for creating "living-wage union jobs for all the unemployed through a massive public works program to develop mass transit, renewable energy, infrastructure, healthcare, education, and affordable housing."
• The party wants to replace all health insurance companies with a publicly funded single-payer system.
• The party wants the federal government to bail out states in order to prevent cuts and layoffs. It seeks a massive increase in taxes on the rich and corporations.
• The party wants to raise the federal minimum wage to $15/hour, adjusted annually for cost of living increases and regional differences, as a step towards a living wage for all.
• The party seeks to repeal all "anti-union" laws. It advocates for democratic unions run by union members in order to advocate for better pay, working conditions, social services. The party advocates for full-time union officials to be regularly elected and receive the average wage of those they represent.
• The party wants to establish a guaranteed living wage pension.
• The party wants to shorten the workweek with no loss in pay and benefits and to share out the work with the unemployed and create new jobs.

How long would Seattle and Washington be considered a wonderful place to do business if this platform was put in place?

Credit: Seattle Times

There is one big problem with the Seattle income tax ordinance.

It is totally and utterly unconstitutional and illegal based on fair reading of the Washington state constitution and state statutes.

First, the city has no grant of authority from the state to enact an income tax. Cities are granted powers by the state. There is no power for Seattle enact a tax on its citizens without that authority.

It is important to also point out that Washington has no state income tax to begin with. In fact, voters in Washington have voted against implementing a state income tax seven times! It was last rejected in 2010 with 66% of state voters against the measure.

Do you think that having no state income tax might also have something to do with the state's favorable economic climate in the CNBC survey?

Further, a 1984 state statute prohibits a county, city, or city-county from levying a tax on net income.

The proponents of the city income tax argue that it is taxing "total income" rather than "net income". That is a distinction without a difference. The practical effect is the same for most taxpayers as city income taxes generally do not allow itemized deductions anyway. However, in taxing "total income, Seattle also must intend to not allow any above the line deductions for sole proprietors. This means that they will be effectively taxed on gross revenues without any deductions for costs of goods sold. 

How would you like to be a Subway franchise owner in Seattle and not be able to deduct the salami you put on a sandwich you sell or the $15 minimum wage you pay your worker to do it?

The income tax on the rich runs further afoul of the state constitution in that it declares that "all taxes shall be uniform upon the same class of property." The Washington Supreme Court has consistently ruled that income is property. Therefore, a tax that levied only on a small group of individuals is not uniform and is not constitutional.

Why would the Seattle city council pass legislation when they clearly have no authority to do so?

It is a typical strategy from the liberal, progressive playbook. You don't work to change state law or the state constitution if it stands in your way. That is too hard, requires too much work and takes too long. 

You pass something that is clearly illegal but look to find one, two or five judges somewhere to rule that it is. It is that simple.

Here is how Socialist Alternative Party Council member Sawant defended the Seattle income tax vote in a recent tally with supporters according to the Seattle Times.

“When we fight, we win!” they chanted with Sawant, who said more public pressure may be needed.

“If we need to pack the courts, will you be there with me?” she asked.

Notice that there is nothing in her rhetoric to change state law. Rather than trying to pack the voting booths in the state she merely wants to pack the courts with her supporters to intimidate the judiciary.

The socialists in Seattle believe that the constitution is for chumps.