Liberty Lake Says No to Local Income Tax | Washington
(The Center Square) – Liberty Lake is the latest municipality to ban a local income tax, joining 11 other counties and 15 cities in Washington state. This brings to 27 the total number of municipalities that have rejected a local income tax.
“City Council hereby declares that the imposition of a local income tax on residents and businesses of the Town of Liberty Lake would be in direct conflict with the high value the town places on the promotion of economic development through the attraction and expansion of financially sound people, employers who pay the family wage”, Resolution No. 22-296approved by the board on Tuesday, reads in part.
“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, the Liberty Lake City Council prohibits the imposition of a local income tax in the event that a local income tax is deemed lawful and authorized by the Supreme Court of the State of Washington or the Washington State Legislature.
Cowlitz, Lincoln, Kittitas, Asotin, Benton, Chelan, Douglas, Franklin, Grant, Spokane, and Yakima counties passed measures prohibiting local income taxes.
Liberty Lake – a city in Spokane County in eastern Washington – joins the cities of DuPont, Battle Ground, Benton, Granger, Grand Coulee, Longview, Kennewick, Moses Lake, Pasco, Richland, West Richland, Spokane, Spokane Valley , Union Gap, and Yakima by prohibiting local income taxes.
“I believe it is my duty to support the Washington State Constitution which clearly outlines revenue and taxation in Article VII,” said Liberty Lake Councilwoman Jamie Baird. Recount Jason Mercier, director of the Center for Government Reform at the Washington Policy Center. “As politicians and the courts redefine what constitutes an income tax, it is important that local jurisdictions uphold the will of those who overwhelmingly oppose any type of income tax.”
She defended the board’s decision.
“Some have accused those of us who support a local income tax ban of inventing a problem that doesn’t exist,” she said. “However, I firmly believe that good leadership is visionary and not reactionary. Our taxpayers and businesses cannot afford to wait and see what happens in Olympia; let’s be clear that we oppose local income taxes. This insurance will attract and retain good business, and it will reassure thousands of taxpayers that the City of Liberty Lake does not support the taxation of their income.
All but one of the municipalities that passed an income tax ban did so by elected vote. In 2021, 78% of Yakima City voters approved Proposition 3, a charter amendment prohibiting city officials from imposing a local income tax.
Meanwhile, a bill that would allow local governments to impose a graduated income tax has stalled in the state legislature. State law prohibits income tax, but Senate Bill 5554 would allow local governments, after reducing sales or property taxes, to create income taxes to fill the funding gap.
Several court cases contribute to this growing anti-tax movement.
In April 2020, the Washington State Supreme Court overturned Seattle’s attempt to impose an income tax on affluent households. In 2017, the city council approved a 2.25% tax on individuals earning over $250,000 and couples earning over $500,000.
Estimates showed that the tax would bring in about $40 million a year.
The King County Superior Court and State Court of Appeals ruled against the tax, and the Supreme Court denied the city’s request for review. The tax was rescinded on the grounds that income is considered property and the state constitution stipulates that property should be taxed evenly.
The Supreme Court, however, rested an appeals court ruling last year that struck down a 1984 law banning net income taxes. This decision allowed cities to impose a flat tax of 1% on net income.
Last year, the Democratic-controlled Legislature passed — and Gov. Jay Inslee signed into law — a capital gains tax aimed at the state’s wealthiest residents. The measure adds a 7% tax on capital gains over $250,000 a year, such as profits from stocks or business sales. Exceptions include the sale of real estate, livestock and small family businesses.
This law is currently being challenged, with Douglas County Superior Court Judge Brian Huber decision Tuesday afternoon, Washington State’s capital gains tax is unconstitutional.
That decision is expected to be appealed, with the state Supreme Court having the final say in the matter.