A plan to tax the rich faces yet another lawsuit.
A plan to tax the rich faces yet another lawsuit. HG

Can't these poor rich people catch a break already? The Pacific Legal Foundation, a libertarian legal group with an office in Bellevue, is the latest group to sue Seattle over its new city income tax. PLF Senior Attorney Brian T. Hodges claims "it’s an ‘achievement tax,’ punishing people for personal success."

The tax, passed by the city council in July, will charge 2.25 percent on Seattleites' income above $250,000 ($500,000 for joint filers). The tax will affect the top 5 percent of the city's population and the revenues will be used to fund social services, reduce other types of taxes, or make up for lost federal funding.

Lawmakers passed the tax expecting legal challenges, and it has already faced several. State law prohibits cities from taxing net income and state Supreme Court decisions have limited the ability to impose a progressive income tax. Supporters of the tax said they welcomed a legal challenge in hopes of changing court precedent. The tax already faces three legal challenges, including one from Matt McIlwain, managing director of Madrona Venture Group, an investment firm.

In a complaint filed in King County Superior Court, PLF argues the income tax violates the state constitution's requirement that taxes on property be uniform. Prior court rulings have considered income as property, which has prevented progressive taxation on income. The complaint argues there is "no rational basis" for making wealthy people pay but not requiring lower income people to pay. PLF also argues the tax violates due process, takings, and equal protection rules in both the state and federal constitution. The group asks the court to issue a permanent injunction stopping the tax and to pay attorneys fees.

PLF has taken on Seattle laws before and is currently trying to stop the city's new "first in time" rental law, which requires landlords to rent to the first qualified applicant in an attempt to address unconscious bias. In making its argument here, PLF employs a familiar line of attack: claiming lawmakers might later increase the tax to affect not just the wealthy, but everyone.

PLF represents four plaintiffs (pro bono)—Steve Davies, Sally Oljar, John Palmer, and Scott Shock—but not all of them would even pay the new tax. They would either be subject to the tax on income above $250,000 or would be subject to "its placeholder rate of 0 percent that could be raised later," according to PLF.

“This arrogant city council needs to learn they can’t ignore our state constitution — including its tax provisions that protect equality and justice for everyone in Washington,” Davies said in a statement.

But the whole point of Seattle's income tax, according to every lawmaker and advocate who argued for it, is to try to address this state's regressive tax system, which results in poor people paying more of their income in taxes than rich people. PLF presents no evidence of lawmakers' intent to expand the tax to lower income people.

The three other cases against the tax have been consolidated and both sides are currently working on motions. Kimberly Mills, a spokesperson for City Attorney Pete Holmes, said she was not yet sure how the new case would fit in, "but of course we will vigorously defend against it."