No. 97863-8
SUPREME COURT OF THE STATE OF WASHINGTON

S. MICHAEL KUNATH, et al.,
Respondents,
vs.
CITY OF SEATTLE, et al.,
Petitioners.

LEVINE AND BURKE RESPONDENTS ANSWER TO CITY OF
SEATTLE’S AND EOI’S PETITIONS FOR REVIEW
Orrick, Herrington & Sutcliffe LLP
Robert M. McKenna (WSBA 18327)
Daniel J. Dunne, Jr. (WSBA 16999)
Carolyn Frantz (WSBA 51392)
701 Fifth Avenue, Ste 5600
Seattle, WA 98104-7097
Phone: (206) 839-4300
Bean, Gentry, Wheeler & Peternell PLLC
Gerry L. Alexander (WSBA 775)
910 Lakeridge Way SW
Olympia, WA 98502
Phone (360) 357-2852
Talmadge Fitzpatrick Tribe PLLC
Phil Talmadge (WSBA 6973)
2775 Harbor Ave SW, 3rd Flr, Ste C
Seattle, WA 98126
Telephone (206) 574-6661
Attorneys for Levine Respondents

Lane Powell PC
Scott M. Edwards (WSBA 26455)
Ryan P. McBride (WSBA 33280)
1420 Fifth Ave., Ste 4200
Seattle, WA 98101
Phone: (206) 223-7000
The Freedom Foundation
David Dewhirst (WSBA 48299)
c/o The Freedom Foundation
PO Box 552
Olympia, WA 98507
Telephone (360) 956-3482
Attorneys for Burke Respondents

 TABLE OF CONTENTS
I.

IDENTITY OF RESPONDENTS................................................... 1

II.

COURT OF APPEALS DECISION ............................................... 1

III.

ISSUES PRESENTED FOR REVIEW .......................................... 1

IV.

STATEMENT OF THE CASE....................................................... 2
A. The Long-Standing, Repeatedly Reaffirmed, Rule in Culliton .......2
B. EOI’s “Local” Income Tax Strategy and Creating the Pathway
to a Statewide Income Tax Through Seattle ................................5
C. Procedural Background ....................................................................7

V.

ARGUMENT .................................................................................. 8
A. There Is No Significant Constitutional Question Posed by
Culliton .......................................................................................10
1. Culliton was not erroneous ................................................... 11
2. The rule in Culliton is not harmful ....................................... 14
3. The underpinnings of Culliton and its progeny have not
changed ...................................................................................... 18
B. If This Court Accepts Review, Issues Relating To Seattle’s
Statutory Authority To Enact An Income Tax Will Likely
Resolve This Case Without Need to Address The
Constitutional Question. .............................................................20

VI.

CONCLUSION ............................................................................. 23

i

 TABLE OF AUTHORITIES
Page(s)
Cases
Aberdeen Savings & Loan Ass’n v. Chase,
157 Wash. 351, 289 F. 536 (1930).................................................11, 13
Apartment Operators Ass’n of Seattle, Inc. v. Schumacher,
56 Wn.2d 46, 351 P.2d 124 (1960) ........................................................3
Cary v. City of Bellingham,
41 Wn.2d 468, 250 P.2d 114 (1952) ....................................................21
Chong and Yim v. City of Seattle,
451 P.3d 675 (Wash. Nov. 14, 2019)...................................................19
City of Spokane v. Horton,
189 Wn.2d 696, 406 P.3d 638 (2017) .................................................20
Culliton v. Chase,
174 Wash. 363, 25 P.2d 81 (1933)............................................... passim
Dean v. Lehman,
143 Wn.2d 12, 18 P.3d 523 (2001) ........................................................3
Harbour Vill. Apartments v. City of Mukilteo,
139 Wn.2d 604, 989 P.2d 542 (1999) ....................................................3
Jensen v. Henneford,
185 Wash. 209, 53 P.2d 607 (1936)............................................. passim
King Cty. v. King Cty. Water Dist. Nos. 20 et al.,
452 P.3d 681 (Wash. Dec. 5, 2019) .....................................................21
Lehnhausen v. Lake Shore Auto Parts Co.,
410 U.S. 356, 93 S. Ct. 1001, 35 L.Ed.2d 351 (1973) ...................18, 19
Petroleum Nav. Co. v. Henneford,
185 Wash. 495, 55 P.2d 1056 (1936).....................................................3

ii

 Planned Parenthood of Se. Pa. v. Casey,
505 U.S. 833, 112 S. Ct. 2791, 120 L. Ed. 2d 674
(1992) ...................................................................................................14
Power, Inc. v. Huntley,
39 Wn.2d 191, 235 P.2d 173 (1951) ......................................................3
Quaker City Cab Co. v. Pennsylvania,
277 U.S. 389, 48 S. Ct. 553, 72 L. Ed. 927 (1928) ..............................18
Sheehan v. Cent. Puget Sound Reg’l. Transit Auth.,
155 Wn.2d 790, 123 P.3d 88 (2005) ....................................................21
State v. Johnson,
188 Wash. 2d 742, 399 P.3d 507 (2017)..............................................14
State ex rel. Stiner v. Yelle,
174 Wash. 402, 25 P.2d 91 (1933).................................................10, 13
Supply Laundry Co. v. Jenner,
178 Wash. 72,34 P.2d 36 (1934)....................................................10, 13
W.G. Clark Constr. Co. v. Pac. Nw. Reg’l Council of
Carpenters,
180 Wn.2d 54, 322 P.3d. 1207 (2014) .............................................9, 15
Statutes
Ordinance No. 125339 ........................................................................16, 17
RCW 35.22.280 ...........................................................................2, 8, 20, 21
RCW 35.22.570 .....................................................................................2, 21
RCW 35A.11.020...................................................................................2, 21
RCW 35A.82.020.......................................................................................21
RCW 36.65.030 .................................................................................2, 8, 22
RCW 84.36.070 .....................................................................................2, 22
Seattle Municipal Code Chapter 5.65 ..........................................................4

iii

 Washington Constitution
Const. art. I, § 19 ....................................................................................8, 22
Const. art. II, § 19 ........................................................................................2
Const. art. VII, § 1 .......................................................................2, 8, 10, 12
Other Authorities
RAP 13.4(d) .................................................................................................1
Wade J. Newhouse, 2 Constitutional Uniformity & Equality
in State Taxation § 4.04 (2d ed. 1984) .................................................12

iv

 I.

IDENTITY OF RESPONDENTS
Respondents constitute two groups of plaintiffs, the “Levine

Plaintiffs” and the “Burke Plaintiffs”, each of whom filed separate actions,
subsequently consolidated, challenging the validity of the Seattle
Ordinance levying a tax on residents’ personal income.1
II.

COURT OF APPEALS DECISION
A copy of the Opinion and related Orders were attached to the two

petitions seeking review filed with this Court.
III.

ISSUES PRESENTED FOR REVIEW
In addition to the two questions presented by the City of Seattle

and intervenor Economic Opportunity Institute (“EOI”), and the
conditional issue they identified (which taxpayers agree should be subject
to review if this Court accepts review of the other issues),2 taxpayers
present the following additional conditional issues:

1

. The “Levine Plaintiffs” are Dena Levine, Christopher Rufo, Martin Tobias, Nicholas
Kerr, Chris McKenzie, Alisa Artis, Lien Dang, Kerry Lebel, and Dorothy M. Sale. The
“Burke Plaintiffs” are Suzie Burke, Gene and Leah Burrus, Paige Davis, Faye Garneau,
Kristi Dale Hoofman, Lewis M. Horowitz, Teresa and Nigel Jones, Nick and Jessica
Lucio, Linda R. Mitchell, Erika Kristina Nagy, Don Root, Lisa and Brent Sterritt, and
Norma Tsuboi. With the exception of Ms. Dang, all were Seattle residents when suit was
filed and reasonably expected to be subjected to the City income tax in the future. For
example, Dorothy Sale was a low-income resident who expected to face a City income
tax on the gain-on-sale of her home of 50 years when sold to fund her move to an assisted
care facility.
2
Seattle and EOI claim that this issue will not be presented if Respondents do not “crossappeal” Division I’s holding relating to the single-subject rule. Petitioner City of Seattle’s
Petition for Review (“Seattle Pet.”) at 3-4; see also Petitioner Economic Opportunity
Institute’s Petition for Review (“EOI Pet.”), at 3. Conditional issues may be raised in an
answer, and that issue is raised as number 4 below. RAP 13.4(d).

1

 1. Whether RCW 35.22.280(2) grants Seattle the authority to enact
an income tax.
2. Whether RCW 35.22.570, in combination with RCW
35A.11.020 or a non-statutory doctrine of “home rule,” grants Seattle the
authority to enact an income tax.
3. Whether RCW 84.36.070’s prohibition of ad valorem taxes on
intangible property prohibits Seattle’s income tax.
4. Whether RCW 36.65.030 violates the “single subject” rule in
article II, section 19 of the Washington Constitution.
IV.

STATEMENT OF THE CASE
Seattle and EOI petition this Court to turn its back on a century of

constitutional law, tax policy and statewide votes, all reaffirming that
graduated income taxes are not permitted in Washington. The Court
should decline.
A.

The Long-Standing, Repeatedly Reaffirmed, Rule in Culliton
Graduated income taxes have been unconstitutional in Washington

for nearly a century. The Washington constitution was amended in 1930 to
prohibit non-uniform taxes on property, defined broadly as “everything,
whether tangible or intangible, subject to ownership.” Amend. 14 to
Const. art. VII, § 1 (1930). Just three years after the amendment, this
Court held that the Constitution’s expansive definition of property
2

 encompasses personal income and, therefore, any tax on income must be
uniform. Culliton v. Chase, 174 Wash. 363, 374-78, 25 P.2d 81 (1933).
In the following years, the Court has consistently applied the rule
in Culliton. See, e.g., Jensen v. Henneford, 185 Wash. 209, 215-16, 53
P.2d 607, 609 (1936); Power, Inc. v. Huntley, 39 Wn.2d 191, 196-97, 235
P.2d 173 (1951); see also, e.g., Apartment Operators Ass’n of Seattle, Inc.
v. Schumacher, 56 Wn.2d 46, 47, 351 P.2d 124 (1960); Petroleum Nav.
Co. v. Henneford, 185 Wash. 495, 496, 55 P.2d 1056 (1936); Harbour
Vill. Apartments v. City of Mukilteo, 139 Wn.2d 604, 608, 989 P.2d 542
(1999); Dean v. Lehman, 143 Wn.2d 12, 25, 18 P.3d 523 (2001).
There have also been numerous democratic challenges to Culliton
at the voting booth, with Washington voters supporting Culliton on every
ballot. Voters have rejected proposed graduated income taxes ten times in
all. Of significance to the issue of stare decisis here, Washington voters
have six times rejected proposed constitutional amendments to allow
income taxation not subject to the property tax uniformity restriction. All
were voted down resoundingly, with at least 64% opposition to every
proposed amendment since 1940; the most recent was rejected by 77% of
voters statewide.3 Washington voters have also definitively rejected four

3

H.R.J. Res. 37 (Wash. 1973) (rejected 77-23); H.R.J. Res. 42 (Wash. 1970) (rejected
68-32); H.R.J. Res. 4 (Wash. 1942) (rejected 66-34); S.J. Res. 5 (Wash.1938) (rejected
67-33); S.J. Res. 7 (Wash. 1936) (rejected 78-22); H.R.J. Res. 11 (Wash. 1934) (rejected

3

 efforts to enact statewide income taxes by initiative, which supporters
evidently hoped would have presented this Court an opportunity to
reconsider Culliton.4 The most recent of these statewide votes was the
2010 rejection of Initiative 1098, which was opposed by 64% of voters.5
Despite all this, in the summer of 2017, Seattle passed a graduated
income tax on “high-income residents.” Seattle Municipal Code (“SMC”)
Chapter 5.65 (“the Ordinance”). The City’s tax applies to the net income
(as reported on taxpayers’ federal income tax returns) of Seattle residents
regardless of where the income was earned. The Ordinance imposes a
2.25% tax on residents’ incomes above $250,000 ($500,000 for joint
filers). Seattle Pet. at 5. Indeed, rather than a truly graduated income tax
under which most residents would be expected to pay some tax for the
“privilege” of living in the City (as the City argues), “tax the rich” was the
rally cry at hearings on the City’s income tax legislation.6

57-43). For vote totals, see Secretary of State, Elections,
https://www.sos.wa.gov/elections/research/income-tax-ballot-measures.aspx.
4
Initiative 158 (Wash. 1944); Initiative 314 (Wash. 1975) (corporate excise tax measured
by income); Initiative 435 (Wash. 1982) (corporate franchise tax measured by income);
Initiative 1098 (Wash. 2010).
5
Secretary of State, Income Tax Ballot Measures,
https://www.sos.wa.gov/elections/research/income-tax-ballot-measures.aspx.
6
CP 1802-04.

4

 B.

EOI’s “Local” Income Tax Strategy and Creating the Pathway
to a Statewide Income Tax Through Seattle
The evidence in the trial court showed that income tax activists at

EOI have worked for years to generate a test case they could bring to this
Court to overcome Washington’s constitutional prohibition on graduated
income taxes. CP 711-718. In response to a statewide defeat in 2010, EOI
developed a “local” strategy “to pass an income tax somewhere” to
generate a lawsuit that could allow this Court to reconsider Culliton and,
after a 2016 effort in Olympia failed, “that somewhere” became Seattle.7
EOI’s stated goal was to invite a legal challenge in the hope a
“sympathetic” Supreme Court would open the door to statewide income
taxes.8 As an EOI action plan entitled “Seattle: Creating the Pathway to a
Statewide Income Tax” explained:
If passed, whether by city council action or by initiative, the
ordinance will be immediately challenged by income tax
opponents as unconstitutional.
This is what we want, as it provides a pathway to the state supreme
court, enabling that court to review and reverse their decisions
from 1935 and 1933 in which they equated income to property and
thereby disallowed a progressive income tax.

7

Goldy, The Road to a State Income Tax Runs Through Seattle, The Stranger (Nov. 5,
2013), http://www.thestranger.com/slog/archives/2013/11/05/the-road-to-a-state-incometax-runs-through-seattle; CP 1744.
8
CP 1742, 1782; see also id. at 1781 (EOI counsel opining: “If the Court ultimately
determines that the City lacks the authority to enact the tax law in question, it will not
necessarily address the income as property case, but it very well may do so, or at the very
least might provide some openings and suggestions for us to follow in devising future
progressive tax strategies.) (emphasis added).

5

 Let’s consider Seattle: We can be forthright in Seattle about the
need for a state income tax and the pathway which could be
pursued by the city to enable that.
CP 1742 (emphasis added).
Seattle dedicated its legislative machinery to EOI’s cause.9 The
City resolved to levy an income tax on Seattle’s “wealthiest citizens” so
that “the City of Seattle can pioneer a legal pathway and build political
momentum to enable the State of Washington and other local
municipalities to put in place progressive tax systems [i.e., income
taxes]”). CP 916-922 (City of Seattle Resolution No. 31747, at 2 (May 1,
2017) (emphasis added)).
The focus of Seattle’s tax was to influence statewide taxation law
rather than advance Seattle’s interests. As one Councilmember admitted in
a private email, “we may not be making the policy decisions we’d
otherwise like to make … simply because a tax on ‘net’ income is not
legal and we have made a commitment to make policy choices based upon
the best ‘legal’ pathway.”10 Seattle did not even identify uses for the
revenue for its tax until two weeks before the City Council voted – long
after the City had committed itself to pursuing such a tax – and were

9

See CP 1744 (revealing EOI’s solicitation of Seattle councilmembers).
Id. at 1849.

10

6

 provided to council members by EOI based on polling to identify causes
that would be most popular. CP 1825-26, 1829.
The City Council passed the Ordinance on July 10, 2017,11 the
same week the City entered into a consulting contract to pay EOI $49,500
for their services.12 Of that amount, $35,500 was paid to Smith & Lowney,
EOI’s counsel of record in this action.13 Immediately before the vote, bill
sponsor Kshama Sawant convened a rally outside City Hall and asked her
supporters, “If we need to pack the courts, will you be there with me?”14
The City did not submit the Ordinance to a popular vote by
initiative or seek legislative authority to tax residents’ income. Mayor
Murray signed the Ordinance into law in July 2017.15
C.

Procedural Background
Following the expected challenge from Seattle residents who

would be subject to the new tax, the trial court invalidated the Ordinance.
Recognizing that state law requires a city to “have express authority … to
levy taxes,” CP 1305 (citation omitted), the court found that Seattle lacked
that authority. In particular, the court concluded that the Ordinance was

11

Id.
Id. at 1863-69.
13
Id.
14
Daniel Beekman, Seattle City Council approves income tax on the rich, but quick legal
challenge likely, Seattle Times (July 10, 2017), https://www.seattletimes.com/seattlenews/politics/seattle-council-to-vote-today-on-income-tax-on-the-wealthy/.
15
CP 369-99.
12

7

 not justified either as an excise tax or as a sui generis tax. CP 1308-12. In
addition, it found that the Ordinance was unlawful because it levied a tax
on “net income,” which is specifically prohibited under RCW 36.65.030 –
at the same time rejecting EOI’s argument that RCW 36.65.030 was
unconstitutional. CP 1310-12. Because Seattle lacked the authority to
enact an income tax at all, the trial court avoided the constitutional issue
Seattle had hoped to raise. Id.
Division I affirmed the result, but substantially departed from the
trial court as to the reasons for its affirmance. It found the City’s authority
to enact the tax in a provision no party had raised, RCW 35.22.280(2),
and, while agreeing with the trial court that RCW 36.65.030 prohibited
Seattle’s tax, invalidated that statute under the “single subject” rule of
article I, section 19 of the Constitution. Because of its statutory rulings,
the court had to address the long-standing rule in Culliton. It invalidated
the non-uniform Ordinance as unconstitutional under article VII, section 1
of the Washington Constitution. Op. at 26-27.
V.

ARGUMENT
Both Division I and the trial court invalidated Seattle’s graduated

income tax – the trial court based on a lack of statutory authority for such
a tax, and Division I based on the long-standing constitutional rule in
Culliton, which has been a bedrock of Washington tax policy for nearly a
8

 century. For both statutory and constitutional reasons, Seattle’s tax, which
was explicitly designed as vehicle to try to influence statewide taxation
policy, should be invalidated. Indeed, the statutory issues themselves
would almost surely resolve the issue in favor of affirmance, without the
need ever to reach Culliton. There is no need for this Court’s review.
Seattle and EOI argue that the rule in Culliton should be
overturned. Washington stare decisis law requires a precedent to be upheld
unless it is both erroneous and harmful, or its underpinnings have
fundamentally changed or disappeared. W.G. Clark Constr. Co. v. Pac.
Nw. Reg’l Council of Carpenters, 180 Wn.2d 54, 322 P.3d. 1207 (2014).
Neither is true in this case. Instead, the structure of state taxation law has
been built around unchanged constitutional language, correctly interpreted
by Culliton. Rather than alleviating harm, disrupting the structure upon
which citizens and businesses have long relied, and which has repeatedly
been preserved by this Court and the state’s voters over the last 80 years –
all to serve Seattle’s and EOI’s political agenda – would itself be harmful.
Culliton’s rule of constitutional construction has been reaffirmed
and ratified six times by the voters (ten times including votes on statewide
income taxes). This history of voter ratification belies the City’s argument
that Culliton must be overturned because it was either wrong when
decided or is a relic of passing legal history. The voters have rejected the
9

 argument that lack of a graduated income tax is harmful. As a result, any
amendment of the rule that income is property should come through the
democratic process, not in response to EOI’s “income tax pathway”
designed to end-run Washington voters. This Court should reject Seattle’s
cynical attempt to use this Court to implement radical change in
longstanding statewide tax policy contrary to the will of the voters.
A.

There Is No Significant Constitutional Question Posed by
Culliton
Culliton and its progeny are central to the structure of Washington

tax law, a structure that Washington voters have repeatedly refused to
change when asked. Washington taxation law has grown up around the
rules established in the 1930s decisions in Culliton, Jensen, Stiner, and
Supply Laundry. Culliton, 174 Wash. 363; Jensen, 185 Wash. at 215-16;
State ex rel. Stiner v. Yelle, 174 Wash. 402, 25 P.2d 91 (1933); Supply
Laundry Co. v. Jenner, 178 Wash. 72,34 P.2d 36 (1934).
The first two decisions established, and then reaffirmed, that article
VII, section 1 of the Constitution forbids a graduated income tax, since a
person’s income is included in the constitutional definition of property as
“everything, whether tangible or intangible, subject to ownership.”
Culliton, 174 Wash. at 375; Jensen, 185 Wash. at 215-20 (citing Const.
art. VII, § 1). The latter two held that Washington’s Business and

10

 Occupations (“B&O”) tax, which taxes gross receipts from business
activity, is an excise tax on the privilege of conducting a business in
Washington, not a tax on property, and not subject to the same
constitutional restriction.
Washington has maintained this basic structure ever since, relying
on the B&O tax, and sales and other taxes, to support state and local
functions. While Seattle tries to paint Washington as an outlier on taxes, it
is not unique – nine states including Washington have no state tax on
personal income.16
1.

Culliton was not erroneous

Seattle and EOI’s arguments in favor of revisiting Culliton are
based on two primary claims: (1) Culliton was bad law when it was
decided in 1933 and remains bad law today; and (2) Culliton is
inconsistent with other cases decided in the 1930s in other states, in the
years following its issuance. They are wrong on both counts.
Seattle and EOI’s arguments focus on three alleged deficiencies:
(1) that Culliton was wrong to rely on Aberdeen Savings & Loan Ass’n v.

16

9 States with No Income Tax, Nasdaq (Mar. 5, 2018),
https://www.nasdaq.com/articles/9-states-no-income-tax-2018-03-05; Tanza
Loudenback, There are 9 States with no income tax, but 2 still tax investment earnings,
MSN.com (Jan. 9, 2020), https://www.msn.com/en-us/money/personalfinance/there-are9-states-with-no-income-tax-but-2-still-tax-investment-earnings/ar-AAJjuUL; see also
Janelle Cammenga, Ranking Individual Income Taxes on the 2020 State Business Tax
Climate Index, Tax Foundation (Nov. 20, 2019), https://taxfoundation.org/best-worstincome-tax-codes-in-the-country-2019/.

11

 Chase, 157 Wash. 351, 289 F. 536 (1930), Seattle Pet. at 9; (2) that
Culliton mischaracterized the law in other states, id. at 9-10; and (3) that
Culliton misinterpreted the “peculiarly forceful constitutional definition of
property” in Article VII, § 1, id. at 10-11.
The third alleged deficiency shows the irrelevance of the first two.
Whatever else Culliton may have said, even Seattle acknowledges that the
decision rested on that court’s interpretation of Washington-specific
constitutional language that it deemed “peculiarly forceful.” Seattle Pet. at
10-11. Indeed, observing differences in the language and structure of
constitutions from other states, the Culliton court stated that “[n]one of the
decisions from other states have any bearing upon the law before us.”17
Far from erroneously relying on out-of-state authority, as Seattle argues,
Culliton largely disregarded it in focusing on the unique language of
Amendment 14.18

17

Seattle relies on information from a treatise by Prof. Newhouse to argue that the
majority of courts have ruled that income is not property under the constitutions and
statutes of other states, arguing that Washington’s definition of property is out of step and
must be incorrect. Seattle Pet. at 9-10. Consistent with Culliton’s observation about the
“peculiarly forceful” language of Amend. 14, however, the treatise shows that a wide
variety of state uniformity provisions exists. Professor Newhouse lists 12 general “types”
of state uniformity provisions and then shows, state-by-state, that very few uniformity
provisions fall squarely into one type or another. Wade J. Newhouse, 2 Constitutional
Uniformity & Equality in State Taxation § 4.04, at 1764-1767 (2d ed. 1984).
18

The allegedly erroneous language quoted in Seattle’s petition, “[t]he overwhelming
weight of judicial authority is that ‘income’ is property and a tax upon income is a tax
upon property,” does not even relate to judicial authority in other states, but rather
comments on Washington case authority. Compare Seattle Pet. at 9 with Culliton, 174

12

 The Court’s mention of Aberdeen, an equal protection case that
pre-dated Washington’s adoption of its unique definition of “property” in
Amendment 14, did not render its holding “incorrect” as shown by the
later decision in Jensen. There, the court properly rejected the Attorney
General’s attempt to convince this Court to overturn Culliton based on
arguments about Aberdeen similar to those Seattle and EOI make today.
The Jensen decision accurately characterized Culliton as having based its
holding on the language of the Washington Constitution that that court had
“fully analyzed, discussed, and defined.” Jensen, 185 Wash. at 219.19
Jensen also puts to rest the erroneous claim that Culliton is
inconsistent with the later cases of Stiner, 174 Wash. 402 and Supply
Laundry, 178 Wash. 72. Seattle Pet. at 13-16. This alleged inconsistency is
yet another argument the Attorney General raised in “strenuously” urging
the Jensen court to overturn Culliton. The Jensen court carefully analyzed
the Attorney General’s “very able” argument, but nonetheless concluded
that the cases were not inconsistent. 185 Wash. at 216-17.20 In doing so,

Wash. at 374 (referring to judicial interpretations of the words of “our Fourteenth
Amendment.”)
19
Culliton was decided after the opinion in Washington Mut. Sav. Bank v. Chase, 157
Wash. 351, 392, 290 P. 697 (1930), which clarified the scope of the ruling in Aberdeen
(including that Aberdeen held that the tax in that case “attempt[ed] to establish a
property” tax), and had the benefit of that analysis.
20
The issue Seattle raises was also directly addressed by Supply Laundry, decided
between Culliton and Jensen, which stressed the difference “between the privilege of
carrying on a business of a commercial nature and the privilege merely of being
employed as a wage earner.” Supply Laundry, 178 Wash. at 77.

13

 Jensen explained why a tax on the right to receive income is a property
tax, not an excise tax, under Washington law, and is fully consistent with a
B&O tax measured in relation to the gross income generated from the
privilege of doing business. The right to receive property, the court
explained, is one of the core elements of property ownership – without a
right to receive property, there is no way to own it. Id. at 218-19.
2.

The rule in Culliton is not harmful

Seattle acknowledges that the structure of Washington law has
been shaped by Culliton, referring to its “ripple effect” on jurisprudence.
Seattle Pet. at 11-12. Changing that rule would cause unknown impacts on
state and local taxation, including previously invalidated taxes, all of
which are part of a complex state and local structure securing revenue
while incentivizing desirable economic and other activity. Stare decisis
also jealously protects citizens’ reliance interests. State v. Johnson, 188
Wash. 2d 742, 756-57, 399 P.3d 507 (2017); see also Planned Parenthood
of Se. Pa. v. Casey, 505 U.S. 833, 856, 112 S. Ct. 2791, 120 L. Ed. 2d 674
(1992). The evidence below showed that many residents of Seattle and
Washington felt that having no income tax was significant to their
decisions to move here for work, to start businesses here, and to buy
homes and settle permanently. CP 650, 693, 699, 644, 747.

14

 Under current tax policies, Washington’s economy is thriving, and
individuals and businesses throughout the state have made major decisions
in reliance on the long-standing current system. The Washington State
Department of Commerce touts the fact that Washington has no income
taxes as a significant competitive advantage in its promotional materials to
attract businesses and citizens to locate in Washington.21 The thriving
economy over the past ten years has produced huge increases in state and
local revenues; over a decade, annual state tax revenues grew 70% to more
than $25 billion as of 2019.22
Even if, as Seattle and EOI argue, Culliton was incorrectly decided
from the beginning, after many years of reliance on that structure, and
given resounding statewide public support for it after votes on multiple
constitutional initiatives, continuing to adhere to that structure is not
harmful. Demonstrating actual “harm” from an incorrect precedent is a
core requirement of Washington stare decisis law. W.G. Clark 180 Wn.2d

21

http://choosewashingtonstate.com/selectusa/ (“Washington State does not have a
personal or corporate income tax.”; http://choosewashingtonstate.com/i-need-helpwith/foreign-domestic-investment/taxes/ (“Washington State offers business many tax
advantages, including no personal or corporate income tax . . . .”);
http://choosewashingtonstate.com/why-washington/our-strengths/pro-business/ (“We
offer businesses some competitive advantages found in few other states. This includes no
personal or corporate income tax.”).
22
2019 CAFR Statistical Section at 290-91, at
https://www.ofm.wa.gov/sites/default/files/public/accounting/report/CAFR/2019/13stats.
pdf.

15

 at 66. The harm in this case would come from changing more than 80
years of precedent, not in allowing it to stand.
Much of the interest Seattle asserts is a statewide interest in
fundamentally changing the manner in which Washingtonians are taxed.
Seattle Pet. at 16-17. This interest is not relevant to the complex question
of whether an individual city can significantly depart from the overall
structure of taxation that has been repeatedly reaffirmed by Washington
voters.
Seattle expresses concerns about tax regressivity. Seattle Pet. at
16-17. Whether Washington state taxes are regressive is not before this
Court, and in any event, is not addressed let alone solved by Seattle’s tax
on its residents. Seattle failed to present any admissible evidence that City
taxes are regressive in the trial court. CP 1192-93.
The Ordinance claims that regressive taxes “disproportionately
harm communities of color,”23 but the 2016 census showed that median
income in Seattle rose for whites, Asians and multiracial residents, with
African Americans showing particularly strong gains.24 The gender pay

23

Ordinance No. 125339 § 1.5. CP 24
See Gene Balk, $80,000 median: Income gain in Seattle far outpaces other cities,
Seattle Times (Sept. 15, 2016), https://www.seattletimes.com/seattle-news/data/80000median-wage-income-gain-in-seattle-far-outpaces-other-cities/.
24

16

 gap has also decreased.25 Seattle’s unique economy is distributing financial
benefits across its diverse population.
The Ordinance also recognizes that “robust economic growth has
created significant opportunity and wealth,”26 funding significant growth
in City government. Seattle’s revenues grew more than 38%, from
approximately $3.9 billion in 2011 to $5.4 billion in 2017.27 Its General
Fund saw a 29% increase.28 For perspective, the City projected its income
tax will increase annual revenues by less than 3%.
The City’s assertions about regressive tax burdens also tell only
part of the relevant story. Under existing tax policies integral to a thriving
economy, Seattle has been creating job opportunities at twice the national
average.29 Over ten years through 2015, a period renowned nationally for
the Great Recession and wage stagnation, per capita personal income in
the Seattle metropolitan division increased from $52,000 to more than

25

See id.
See Ordinance No. 125339 § 1.2. CP 23
27
Compare City of Seattle, 2013 Adopted and 2014 Endorsed Budget (2013) (“2013
Seattle Budget Book”), at 44
http://www.seattle.gov/Documents/Departments/FinanceDepartment/13adoptedbudget/Fu
ll2013Adopted2014EndorsedBudget_000.pdf with City of Seattle, 2018 Proposed Budget
(“2018 Seattle Proposed Budget Book”) at 100
http://www.seattle.gov/Documents/Departments/FinanceDepartment/18proposedbudget/2
018ProposedBudgetBook.pdf.
28
Compare 2013 Seattle Budget Book, at 57 with 2018 Seattle Proposed Budget Book at
110 .
29
See United States Bureau of Labor Statistics, Seattle Area Economic Summary
(updated Jan. 15, 2020),
https://www.bls.gov/regions/west/summary/blssummary_seattle.pdf .
26

17

 $65,800—an increase of more than 25%.30 Workers in a range of fields
make more per hour than their national counterparts.31 Seattle’s median
household income increased by nearly $10,000 to more than $80,000 just
in 2017, the largest increase of the 50 most populous cities in the
country.32
3.

The underpinnings of Culliton and its progeny have not
changed

Nor have the underpinnings of Culliton or Jensen changed. The
only alleged change in the law that Seattle has identified occurred fortyseven years ago, in 1973, when the United States Supreme Court overruled
an equal protection case, Quaker City Cab Co. v. Pennsylvania, 277 U.S.
389, 48 S. Ct. 553, 72 L. Ed. 927 (1928). Lehnhausen v. Lake Shore Auto
Parts Co., 410 U.S. 356, 365, 93 S. Ct. 1001, 35 L.Ed.2d 351 (1973).
Lehnhausen held that federal equal protection did not prohibit Illinois
from taxing the personal property of corporations differently from
individuals. In overruling Quaker City, the U.S. Supreme Court noted that

30

U.S. Bureau of Economic Analysis, Table CA1 Personal Income Summary: Personal
Income, Population, Per Capita Personal Income,
https://www.bea.gov/itable/iTable.cfm?ReqID=70&step=1#reqid=70&step=30&isuri=1
&7022=20&7023=7&7033=-1&7024=nonindustry&7025=8&7026=42644&7027=2015,2014,2013,2012,2011
2010,2009,2008,2007,2006&7001=720&7028=3&7031=8&7040=1&7083=levels&7029=20&7090=70 (last visited Oct. 23, 2017).
31
See id.
32
Gene Balk, $80,000 median: Income gain in Seattle far outpaces other cities, Seattle
Times (Sept. 15, 2016), https://www.seattletimes.com/seattle-news/data/80000-medianwage-income-gain-in-seattle-far-outpaces-other-cities/ .

18

 equal protection law had relaxed, so that Illinois had wider discretion to
make such distinctions. 410 U.S. at 365.
Nothing in Lehnhausen even purported to address whether income
is properly defined as “property” under Washington state law. In fact,
Lehnhausen itself was not even a case about income taxes, so its holding
could not have changed any federal law about the nature of income taxes,
if any had ever existed. Culliton and its progeny are likewise not based on
equal protection principles, but instead on the language of the Washington
constitution prohibiting graduated property taxes. Lehnhausen therefore
has nothing to do with Culliton.
This is a far cry from the decision in Chong and Yim v. City of
Seattle, 451 P.3d 675 (Wash. Nov. 14, 2019), where this Court abandoned
stare decisis where Washington regulatory takings law had “always” been
based on an “attempt[] to discern and apply the federal definition of
regulatory takings,” and had to be changed to reflect changes in that
definition. Chong and Yim, at 9-10 (slip op). Washington taxation law is
instead based on state constitutional law; Seattle and EOI make no
argument that the underpinnings of state law have changed.
Whether Culliton should be overturned is therefore not a
significant constitutional question requiring this Court’s review.

19

 B.

If This Court Accepts Review, Issues Relating To Seattle’s
Statutory Authority To Enact An Income Tax Will Likely
Resolve This Case Without Need to Address The
Constitutional Question.
Ironically, even if this Court takes review it should never reach

Culliton because the City is not statutorily authorized to enact a graduated
income tax. If it accepts review, this Court will almost certainly affirm
Division I, but for the narrower statutory reasons stated by the trial court.
Culliton aside, Seattle lacks authority to enact an income tax at all.
As Division I acknowledged, municipalities have no inherent power to
tax; the Legislature must delegate them such power. Op. at 11; City of
Spokane v. Horton, 189 Wn.2d 696, 702, 406 P.3d 638 (2017) (under
Washington constitution, cities have no right to levy any particular kind of
tax unless authority to do so is specifically delegated by the legislature).
The lower courts considered three possible grants of authority.
Since none of them specifically authorizes Seattle to enact an income tax,
Division I’s invalidation of the Ordinance must be upheld, but on wholly
separate grounds. Each of these questions is, therefore, a conditional issue
for review, necessary to resolve before the constitutional question in
Culliton can be reached or reconsidered. These three threshold issues are:
(1) Whether the grant of authority to municipalities to enact “real or
personal” property taxes in RCW 35.22.280(2) allows Seattle to impose an

20

 income tax. Neither party made this argument to the trial court or Division
I, and Division I cited no Washington authority in support of its erroneous
holding that RCW 35.22.280(2) authorized a tax on income as property.
(2) Whether RCW 35A.11.020 and/or the doctrine of “home rule”
grants Seattle and all code cities “plenary” authority to enact an income
tax. RCW 35A.11.020; RCW 35.22.570. No Washington court has ever
found that these provisions, standing alone, grant new taxation authority.
Rather, as this Court recently held, this provision is designed only to
extend to code cites the defined list of statutorily authorized taxation
powers granted to other cities – not to provide “plenary” authority to enact
any tax. King County v. King County Water Dist. No. 20 et al, 453 P.3d
681, 686 (Wash. Dec. 5, 2019).
(3) Whether the Ordinance is an excise tax authorized by
RCW 35.22.280(32) or RCW 35A.82.020. Excise taxes are taxes imposed
on the voluntary action of a taxpayer and are based on the benefits that the
taxpayer obtains from that action. Sheehan v. Cent. Puget Sound Reg’l.
Transit Auth., 155 Wn.2d 790, 800, 123 P.3d 88 (2005). The activity that
Seattle seeks to tax here, however, is mere residence in the city itself.
Unlike starting and operating a business, or producing and selling
products, living and earning income in the City is not the proper subject of
an excise tax, which would likewise violate fundamental rights. See Cary
21

 v. City of Bellingham, 41 Wn.2d 468, 471, 250 P.2d 114 (1952) (“The
right to earn a living by working for wages is not a substantive privilege
granted or permitted by the state.”). Neither Division I nor the trial court
found this to be a basis of authority for Seattle’s Ordinance.
In addition to the need for statutory authorization for Seattle’s
graduated income tax, which is lacking, two other statutory provisions
affirmatively prohibit the Ordinance. If this Court grants review on the
Culliton question, it must also review these additional conditional issues:
(4) RCW 36.65.030 provides that a city “shall not levy a tax on net
income.” After analyzing tax law and the underlying facts, Division I
correctly concluded that the Ordinance levies a tax on “net income” and
would therefore prohibit Seattle’s tax. Division I’s invalidation of this
statute under the “single subject” rule of Article I, section 19 of the
Washington Constitution was incorrect, and this Court should also
consider that issue if review is granted.
(5) RCW 84.36.070(2) exempts “intangible personal property”
from ad valorem taxation. Division I decided that the legislature did not
intend this provision to apply to income taxes, despite longstanding
Washington law holding income to be personal property. If the petition is
granted, then conditional review of this issue should also be granted.

22

 There are therefore multiple paths supporting affirmance without
ever reaching the rule in Culliton.
VI.

CONCLUSION
The substantial public interest is best served by declining to accept

review of a case premised upon a single city’s state-wide political agenda.
Recognizing that the citizens of Washington have affirmed the holding in
Culliton time and again, tax activists have worked for years to pioneer a
“local” pathway that would open a “side door” into this courthouse as an
alternative route to amend the constitution. Now that the Constitution has
been construed, and with full respect for the fact that the Court’s
construction was repeatedly confirmed by the voters, if there is to be a
constitutional change it too should occur by a vote of the people of
Washington, in full consideration of the state-wide impacts of such a
change.

23

 RESPECTFULLY SUBMITTED this 30th day of January, 2020.
Orrick, Herrington & Sutcliffe LLP
Robert M. McKenna (WSBA 18327)
Daniel J. Dunne, Jr. (WSBA 16999)
Carolyn Frantz (WSBA 51392)
701 Fifth Avenue, Ste 5600
Seattle, WA 98104-7097
Phone: (206) 839-4300

Lane Powell PC
Scott M. Edwards (WSBA 26455)
Ryan P. McBride (WSBA 33280)
1420 Fifth Ave., Ste 4200
Seattle, WA 98101
Phone: (206) 223-7000

Bean, Gentry, Wheeler & Peternell LLC
Gerry L. Alexander (WSBA 775)
910 Lakeridge Way SW
Olympia, WA 98502
Phone (360) 357-2852
Talmadge Fitzpatrick Tribe PLLC
Phil Talmadge (WSBA 6973)
2775 Harbor Ave SW, 3rd Flr, Ste C
Seattle, WA 98126
Telephone (206) 574-6661

The Freedom Foundation
David Dewhirst (WSBA 48299)
c/o The Freedom Foundation
PO Box 552
Olympia, WA 98507
Telephone (360) 956-3482
Attorneys for Burke Plaintiffs

Attorneys for Levine Respondents

24

 CERTIFICATE OF SERVICE
I hereby certify that I caused the foregoing Answer to Statement of
Grounds for Direct Review to be served on counsel for all other parties in
this matter via this Court’s e-filing platform.
Dated January 30, 2020.

s/Robert M. McKenna
Robert M. McKenna
Attorney for Respondent-Intervenors

25

 ORRICK, HERRINGTON & SUTCLIFFE LLP
January 30, 2020 - 4:50 PM
Transmittal Information
Filed with Court:
Appellate Court Case Number:
Appellate Court Case Title:

Supreme Court
97863-8
City of Seattle, et al. v. S. Michael Kunath, et al.

The following documents have been uploaded:
978638_Answer_Reply_20200130164852SC323954_4490.pdf
This File Contains:
Answer/Reply - Answer to Petition for Review
The Original File Name was 2020 01 Response to Petitions for Review.pdf
A copy of the uploaded files will be sent to:
Dawn.taylor@pacificalawgroup.com
EStahlfeld@freedomfoundation.com
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bth@pacificlegal.org
cate@washingtonappeals.com
cfrantz@orrick.com
cindy.bourne@pacificalawgroup.com
claire@smithandlowney.com
edwardss@lanepowell.com
ewb@pacificlegal.org
galexander@bgwp.net
greg.wong@pacificalawgroup.com
howard@washingtonappeals.com
hstrasberg@comcast.net
hstrasberg@me.com
iglitzin@workerlaw.com
jamie.lisagor@pacificalawgroup.com
kent.meyer@seattle.gov
knoll@smithandlowney.com
lawyer@stahlfeld.us
matt@davisleary.com
matt@tal-fitzlaw.com
matthew@davisleary.com
mcbrider@lanepowell.com
paul.lawrence@pacificalawgroup.com
phil@tal-fitzlaw.com
rmckenna@orrick.com
skahan@workerlaw.com
spitzerhd@gmail.com
thien.tran@pacificalawgroup.com
woodward@workerlaw.com
Comments:

 Sender Name: Malissa Tracey - Email: mtracey@orrick.com
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