Two dozen Washington municipalities have now banned income taxes

Two dozen cities and counties in Washington state have adopted ordinances that prohibit the imposition of a local income tax.

Kittitas County, located south of Yakima, became the ninth county city to adopt such a ban when the county board of commissioners approved a resolution on Tuesday.

It joins Asotin, Benton, Chelan, Douglas, Franklin, Grant, Spokane and Yakima counties in adopting such a measure.

Cities that have done the same are DuPont, Battle Ground, Benton, Granger, Grand Coulee, Longview, Kennewick, Moses Lake, Pasco, Richland, West Richland, Spokane, Spokane Valley, Union Gap and Yakima.

“The Board of Kittitas County Commissioners knows that a strong and encouraging business climate is one of the best ways to attract and retain good businesses to employ people in family wage jobs,” according to the resolution passed by the commissioners. “While imposing a local income tax may generate additional revenue in the short term, it may very well result in less long-term revenue due to the dampening effect it would have on our businesses.”

All but one of the cities and counties have adopted the measure on a vote by elected officials. Voters in the city of Yakima last year approved a charter amendment banning income taxes by a margin of 78-22. In addition, 61% of voters recommended that legislators repeal a new capital gains tax.

“As more cities and counties act to ban a local income tax, hopefully this clear and consistent message opposing an income tax will finally be heard by state lawmakers and the governor,” according to Jason Mercier, director of the Center for Government Reform at the Washington Policy Center.

The vote in Kittitas comes as legislators consider passing a bill allowing local governments to impose a graduated income tax will be considered.

At play here are two court cases.

The state Supreme Court in April of 2020 struck down an attempt by Seattle to impose an income tax on wealthy households. The city council there in 2017 approved a 2.25 percent tax on individuals earning more than $250,000 and couples earning more than $500,000.

Estimates showed the tax would bring in about $40 million a year for the city.

Both the King County Superior Court and the State Court of Appeals ruled against the tax and the Supreme Court declined the city’s request for a review. The main reason the tax was overturned is because income is considered property and the state constitution says property must be taxed evenly.

The Supreme Court did, however, let stand an appellate court decision last year that overturned a 1984 law banning taxes on net income.

That move opened the door for cities to impose a 1% flat tax on net income.

Legislators last year also approved a new law, to begin this year, that would impose a 7% tax on long-term capital gains in excess of $250,000 and is estimated to net the state $500 million annually.