Nov. 22 (UPI) -- A Seattle judge ruled Wednesday that a "wealth tax" on the city's upper income earners was illegal, delivering a blow to a city with one of the highest income inequality rates in the nation.
King County Superior Court Judge John R. Ruhl said county officials did not have the authority to impose the tax when they voted for it in July because state law prohibits taxes on net income. According to the Seattle Times, the tax was an additional 2.25 percent on individuals earning more than $250,000 per year and married couples earning more than $500,000 per year.
The tax was expected to generate approximately $140 million for the Seattle coffers.
Brian T. Hodges, a senior attorney for the Pacific Legal Foundation, which represented plaintiffs challenging the tax law, said Seattle officials, "knowingly violated several laws in imposing this tax."
In a joint statement, Seattle Mayor Tim Burgess and City Attorney Pete Holmes said their city is "one of the worst in the nation when it comes to tax fairness, a result of our misguided over-reliance on regressive sales taxes."
Burgess and Holmes said the tax was an attempt to fix Seattle's tax problems and they plan to appeal Ruhl's decision.
"We are also living in a time of extreme income inequality that corrodes our social compact and causes many to wonder whether wealthy individuals are paying their fair share," they said.
According to a Bloomberg report based on data from the U.S. Census Bureau, Seattle has the country's fourth highest rich-poor gap, described as "the difference in annual income between households in the top 20 percent and those in the bottom 20 percent."
Seattle's gap was approximately $48,000. Only Bridgeport, Ct. ($49,000), San Jose, Calif. ($69,000) and San Francisco ($70,000) had higher gaps.