By Daniel Beekman

The Seattle Times

SEATTLE — The Seattle City Council unanimously approved an income tax on wealthy residents Monday, a move widely expected to draw a quick legal challenge as neither Washington state nor any of its cities collects an income tax.

The measure applies a 2.25 percent tax on total income above $250,000 for individuals and above $500,000 for married couples filing their taxes together.

The city has estimated the tax would raise about $125 million a year and cost $10 million to $13 million to set up, plus $5 million to $6 million per year to run and enforce.

The council’s finance committee cleared the tax last week, and increased the rate from 2 percent to 2.25 percent.

Opponents have argued the tax would violate state law and the state constitution, while proponents have said it would make Seattle’s tax structure more fair. They want to make it a test for the legality of taxing income.

In a statement after the 9-0 vote, Mayor Ed Murray said Seattle is “challenging this state’s antiquated and unsustainable tax structure by passing a progressive income tax.” He added the goal is to replace a regressive tax system with a “new formula for fairness.”

Under the legislation, money from the tax could be used by the city to lower property taxes and other regressive taxes; address homelessness; provide affordable housing, education and transit; replace federal funding lost through budget cuts; create green jobs and meet carbon-reduction goals; and administer the tax.

The recent push for an income tax began in February, when nonprofits and labor unions calling themselves the Trump Proof Seattle coalition launched a campaign. The coalition, which said the revenue could offset threatened cuts by President Donald Trump’s administration, held town hall events in every council district to drum up support.

A boost came in April, when Murray, during a mayoral candidate forum, said he would send income tax legislation to the council. Earlier that week, former Mayor Mike McGinn, who’s running again this year while Murray is not, had come out in support of an income tax.

A lawsuit will likely emerge in the next week or so, brought by a Seattle individual or business, said Jason Mercier, director of the Center for Government Reform at the conservative Washington Policy Center, which opposes the tax.

There are three key legal barriers, according to Mercier: The state constitution says taxes must be uniform within a class of property; a 1984 state law bars cities from taxing net income; and cities must have specific state authority to enact new taxes.

“We are greatly disappointed the Seattle City Council voted to impose a clearly illegal and unnecessary income tax,” said Dann Mead Smith, Washington Policy Center president, in a statement. “As a lifelong Seattle resident, it is frustrating to see the Seattle City Council choose to waste taxpayer dollars on lawsuits for an income tax that is not needed.”

The Freedom Foundation, a conservative think tank based in Olympia, announced in a statement after the vote that the organization was prepared to challenge the tax in court — “hopefully with a coalition of other freedom-minded organizations.”

“No matter who starts out paying it, everyone will eventually suffer,” foundation CEO Tom McCabe said in the statement, asserting that only the rich would pay “at first.”

He added that it is “manifestly illegal and unconstitutional in Washington to impose a tax that treats people differently based on income level.”

Supporters of the tax rallied outside City Hall before Monday’s vote, waving signs and cheering.

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

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

Karen Taylor, 34, was in the crowd holding a sign with a Seattle Times headline dating to the early 1900s: “Why don’t you come through with a little bit of the wealth Seattle has given you, rich man?”

The Judkins Park resident said she’s struggling to stay housed while “the wealthy aren’t paying their fair share.”

“Whoever goes against this is openly causing suffering,” Taylor said.

Outside City Hall after the vote, calls of “tax the rich” drowned out Washington State Republican Party chair Susan Hutchison’s attempts to speak to the media against the measure. She had planned to call on Seattle residents to “forcefully resist the tax” by signing a petition, according to a news release issued earlier Monday.

In a KING 5/KUOW poll last month, 66 percent of 900 Seattle adults who took part expressed support for a city income tax on the wealthy, while 23 percent were against it and 12 percent weren’t sure.

There were about 11,000 individuals in Seattle with earned annual incomes of at least $250,000 in 2015, according to U.S. Census Bureau data. The Seattle tax would cover both earned and unearned income.

“Washington has among the most regressive tax systems in the United States,” the legislation states, citing research by the Institute on Taxation and Economic Policy.

In 2015, Washington households with incomes below $21,000 paid 16.8 percent of their income in state and local taxes, on average, while households with income above $500,000 paid only 2.4 percent, according to the organization.