EXCLUSIVE: Freedom Foundation sues Seattle over controversial new income tax

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Seattle tax hike: Think tank fights back with lawsuit

The Seattle City Council wants to tax the rich but the Freedom Foundation is suing claiming the hike is unconstitutional

The Freedom Foundation sued Seattle Wednesday over its controversial new income tax on the rich, which critics call “an assault” on the law that sets a dangerous precedent.

The tax, passed by the Seattle City Council last month, targets high-income earners as part of what local lawmakers describe as “a new formula for fairness.”

The tax measure requires residents to pay a 2.25 percent tax if they are a single filer and make more than $250,000 annually or file jointly and make more than $500,000.

Its passage prompted a court challenge from the Freedom Foundation, a conservative think tank that considers the tax a slippery slope that could open the door to more taxes in the future.

The outrage over the tax even prompted the Washington Republican Party to call for “civil disobedience” and urged its members to “refuse to comply, file or pay.”

STATE GOP URGES 'CIVIL DISOBEDIENCE' OVER NEW SEATTLE TAX, SAYS RESIDENTS SHOULD NOT PAY 

Wednesday’s suit, filed in King County Superior Court on behalf of several of the city’s residents, lays out the case against the tax.

“This is clearly bad policy and illegal, but it’s also an assault on the rule of law,” David Dewhirst, a lawyer for the Freedom Foundation, told Fox News in a statement. “If they can get away with it this time, where does it stop?”

'If they can get away with it this time, where does it stop?'

— David Dewhirst, lawyer for Freedom Foundation

The suit argues that Seattle’s plan to tax the rich is unconstitutional, because the state of Washington imposes strict limits on taxes; prohibits taxes on net income; and requires cities to get permission to tax residents.

“This tax ordinance’s legal and constitutional infirmities are patently obvious,” Dewhirst said.  “That’s what makes this whole thing so chilling.”

Dewhirst accused city council members of knowingly adopting “a law that can only survive if the courts abandon decades of precedent – precedent grounded in Washington’s fundamental commitment to legal equality.”

Outgoing Democratic Mayor Ed Murray says the goal of the tax “is to replace our regressive tax system with a new formula for fairness while ensuring Seattle stands up President Trump’s austere budget that cuts transportation, affordable housing, healthcare and social services.”

The city estimates the new tax would raise $140 million a year and cost between $10 million and $13 million to set up, plus an additional $6 million a year to enforce. The money would go toward affordable housing projects as well as other services for lower-paid workers.

Councilmember Kshama Sawant told Fox News in July that the need for the tax is “crystal clear.”

She said the city isn’t backing down – and says Seattle is ready to duke it out in court in what’s likely to be a very costly legal battle.

“We will no longer tolerate a system that buries poor and working class people in taxes, while giving big business and the super-rich yet another free ride; a system that underfunds affordable housing to the point where thousands are homeless, a system that criminally underfunds education,” Sawant said.

Washington is one of seven states in the country that does not have a personal income tax.

Analysts at the Washington Policy Center also note the Washington Supreme Court ruled in 1951 to invalidate the state income tax. Further, a law passed in 1984 prohibits any city or county from levying a tax on net income.

The state’s voters have rejected the idea of an income tax nine separate times. Washington voters did approve an income tax in 1932, but the state Supreme Court ruled the measure was unconstitutional.