An income tax for high-income Port Townsend residents?

A small Port Townsend group led by Tobi McEnerney says such a tax would be a remedy for Washington state’s regressive tax structure. The group favors a 1.5 percent tax on income of more than $200,000 and it plans to hold a forum on the idea at 6 p.m., Thursday, May 11 at the Cotton Building, 607 Water St.

State Rep. Mike Chapman, 24th District, is expected to attend the meeting.

McEnerney, a 1997 graduate of Port Townsend High School who studied political science at the University of Washington and now lives in Port Townsend with her husband and 4-year-old son, said an income tax is an issue of fairness.

“As it stands, the affluent contribute 2.4 percent of their income to taxes while the lowest earners pay 16.8 percent of their income,” McEnerney said in an email interview with The Leader.

An income tax on income of more than $200,000 in Port Townsend, she said, attempts to remedy that disparity. At present, Washington state relies primarily on sales tax and a business and occupation tax for funding.

“It calls on the affluent to chip in a relatively small amount to fund public services and infrastructure that they likely use at the same rate that people who are paying triple what they pay use them.

“Frankly, it comes down to good old-fashioned fairness. Progressive income tax is fair and does not, in theory, penalize the poor or the affluent.”

270 MAY EARN $200,000

McEnerney estimated that 270 people in Port Townsend – out of 9,255 – earn more than $200,000 per year.

She said Washington state has the most regressive tax structures in the nation. An income tax was popular in the state during the Great Depression.

The state constitution requires that property must be taxed “uniformly,” and in a 1933 state Supreme Court case, judges defined income as “property,” and thus a graduated income tax was deemed unconstitutional in a 5-4 decision.

Some people, including McEnerney, think today’s Supreme Court could overturn the 1933 decision.

That’s where Port Townsend – and Seattle, which is likewise looking at implementing a citywide income tax – come in.

COURT DECISION

McEnerney said it was “decidedly” the intent of the Port Townsend income tax proposal, in part, to put pressure on the state Supreme Court to revisit the 1933 decision.

“We hope Port Townsend can be a leader for state change. The end goal is to offer an equitable taxation and open a revenue source for our town,” she said. “Alas, the 1933 ruling is a barrier to that as it stands.

“The constitution doesn’t say anything about prohibiting an income tax,” McEnerney said. “The constitution says that all property taxes must be uniform. The state Supreme Court, in the 1930s, held that income is property and therefore an income tax must be uniform to be constitutional. Since then, most all courts including the U.S. Supreme Court have held that income is NOT property and many have held that an income tax is a kind of excise tax (but most importantly not a property tax).

“Our point is that an income tax is not a property tax. Numerous courts and legal scholars share our understanding, and the 1930s state Supreme Court decisions have been deeply undermined and were not reasoned in the first place.”

CITY RESPONSE

David Timmons, Port Townsend city manager, opined that Seattle had the financial wherewithal and legal firepower to fight for an income tax.

“Seattle is currently gearing up to do that as well. So we’re kind of saying, ‘Well, let Seattle fight the battle.’ They’ve got a lot more resources than we do. We can write an amicus brief in support, if we want,” he said.

McEnerney said the group would present the income tax issue to the council. She is also meeting with council members individually.

McEnerney planned to talk with Port Townsend City Council member Robert Gray on May 5. Prior to the meeting, Gray expressed skepticism. He noted that some people chose to live in Washington state because there was no income tax.

“I don’t think it would go over well, but who knows,” he said.

GENERATING INCOME

McEnerney estimated that a Port Townsend income tax of 1.5 percent on income of more than $200,000 could generate $1.87 million annually, and that sort of money could be used, for example, to address the affordable housing problem, to improve roads or pay for education.

She cited a recent city-backed plan to ship a four-unit apartment from Victoria, British Columbia, to Port Townsend for use as affordable housing to make her case. Four additional studio apartments would be built in the basement level, bringing the total number of units to eight. The total cost of the entire project is estimated to be $475,000.

Using that eight-plex as a starting point, McEnerney argued that 32 units could be built annually with the $1.87 million city property tax.

“If we use the new housing trust eight-plex as a marker, we could build 32 units. If an average of three people live in a unit (considering some families of 4, or 5, some couples and some single folks) we could house 96 people a year. That’s a significant dent.”

McEnerney said the income tax could also be used to maintain and repair the city’s roads.

“[City Manager David] Timmons’ famous line is that it takes ‘a million a mile’ to maintain and repair roads. The state of our roads are bothersome to many residents, and this source of revenue could fix nearly 2 miles of road per year. It may take some years to fix uptown alone … so while it’s a smaller impact than housing, it is in dire need of funding.”