October 31, 2016
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Olympia vote on income tax could launch major test case on statewide income tax

The language on the city ballot talks mostly about setting up an education scholarship fund, noting only in passing that funding for the grants would come from a tax on households making more than $200,000 a year. But City of Olympia Initiative No. 1, if approved, could set up a chain of events, including a court challenge to the legality of a state income tax, and may lead to serious discussion about the tax.

Olympia Mayor Cheryl Selby, who opposes the initiative, said it's not about education -- it's about creating a test case to allow the state Supreme Court to establish that an income tax is constitutional.

“Their endgame is to set Olympia on a trajectory for a (state) Supreme Court battle over whether an income tax is legal,” Selby said. “It’s a constitutional argument. Where this should be happening is in our legislature. It shouldn’t be happening on the backs of a small city.”

Selby and former state Supreme Court Chief Justice Gerry Alexander, in a piece published in The Olympian last week, also point out that even if the voters approve the tax and the court upholds it, “…the IRS will not share income tax data with a municipality, so the only way to know who owes the tax would be for all of us to send our tax returns to the city.”

This, they say, would require setting up a tax bureaucracy within city government and, even after that, the initiative has no enforcement provisions, so there is no way to compel people to submit their federal tax information or pay the tax.

Hugh Spitzer, a University of Washington law professor specializing in state constitutional law who is affiliated with the law firm that is representing the city of Olympia in the case, said that if the state Legislature passed an income tax or asked the voters to pass a statewide income tax, there’s a reasonably good chance the court would uphold such a law this time around.

But the effort in Olympia is “beyond a code city’s statutory authority,” Spitzer said.

Nearly all the funding for the Olympia ballot measure comes from Seattle donors, and a Seattle-based nonprofit wrote the text of the initiative for this first citywide income tax in Washington. Voters statewide have repeatedly voted down a statewide income tax, but supporters say it has a broader base of support in liberal Olympia, and that today's Supreme Court could overturn decisions from the 1930s that ruled an income tax unconstitutional.

Oregon Public Broadcasting, The News Tribune and Opportunity Washington take a deeper look at the issue.

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