A slew of new taxes and tax increases pose a big lift for taxpayers and the economy.
In the “taxes” part of “death and taxes,” here is a bit of our inevitability this year:
Property taxes on a median-value house in King County rose $800 compared with 2017, and are up 43 percent over the past four years. In addition to rising home prices and voter-approved levies, the Legislature’s move to fund schools to meet the Supreme Court’s McCleary ruling is the biggest driver.
The Seattle City Council is expected to adopt soon some form of head tax on employers grossing more than $8 million to $12 million a year. The money raised would go for additional spending on homeless services.
The council is also considering a special taxing district for a big swath of the central core. Property owners would be assessed for infrastructure needed to reclaim the waterfront when the Alaskan Way Viaduct comes down.
And don’t forget the income tax the council approved on wealthy residents last year. It’s probably a loser that will be found unconstitutional in Washington. But the effort is there.
It’s all part of a heavy lift in a growing, changing city. Also, a city facing an administration in the Other Washington that is hostile to urban needs. But when does the tax bill become too big? For retirees without the ability to keep up on property taxes, the threshold is already crossed. The effect on the larger economy presents a more complicated question.
According to the Tax Policy Center, per capita state and local taxes in Washington have risen from an inflation-adjusted $3,180 in 1977 to $4,772 in 2015, the most recent year with complete data. This is in line with, and slightly below, the national average. No doubt Seattle would come in higher — in recent years the city has been spending heavily.
Meanwhile, Washington is one of the few states in the nation without an income tax. One consequence is that it is the most regressive in the nation, with the tax burden falling most heavily, proportionately, on the poorest 20 percent.
Yet that’s not a complete assessment. Companies must contend with the state’s labyrinthine business and occupation (B&O) tax and other business-related taxes. Developers and construction companies have paid hundreds of millions of dollars into Seattle’s treasury in recent years, in the form of excise taxes and new construction sales taxes.
Finally, Seattleites have long been generous on passing and sustaining a variety of special levies for parks, transportation, schools, low-income housing and more.
So while Seattle doesn’t make the many lists of highest-taxed cities in America, it’s hardly a low-tax city either. For example, a 2003 study showed Seattle No. 43 among major cities. A 2013 study found Seattle similarly low.
Activists look at this situation and see an opportunity for more. Fiscal conservatives and even many centrists worry that the city could kill its golden-egg-laying geese by too much taxation.
It’s not a competitive issue to be dismissed. Eastside leaders, and even those in the South Sound, would love to see the city stumble, creating an opportunity to grab some of its corporate assets and talent.
The head tax could be particularly destructive for Seattle employment.
The city’s boom over the past decade has not been a result of the City Council’s brilliance. Instead, it has come from Amazon and other companies; Paul Allen’s South Lake Union innovation district; being cheaper than the Bay Area; and the “back to the city movement,” drawing companies and workers to high-quality cities.
This unique moment in history is not guaranteed to continue.
The head tax is also troubling because the city and county have spent ever larger sums of taxpayer dollars on homelessness in recent years — and the problem has gotten worse. The Rule of Holes states: When in a hole, stop digging. How will even more money make a constructive difference? Why won’t it merely draw more homeless?
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It was especially telling that the Seattle Metropolitan Chamber of Commerce, the most progressive chamber in the nation, declined to join the “community panel” that recommended the tax. Lack of that business input makes for a very limited community voice.
High taxes aren’t inherently bad. It depends on what one gets for them.
Scandinavian countries have very high tax rates. But the benefits are widespread and visible, with universal health care, high-speed trains, great schools and a generous social-safety net. They regularly rank as the world’s happiest countries.
Many Americans don’t like paying taxes — part rugged individualism, part decades of Reaganite ideology — and often don’t see or know where the money goes. Remember the famous moment when a constituent, during the Obamacare debate, told a congressman to “keep your government hands off my Medicare.”
Seattle, like most other blue cities, sees things differently. Even before the rise of Outrage Culture activists, staid Seattleites willingly taxed themselves for the greater good. Most of these investments have led to a better, stronger city, not “another Detroit.”
Yet the consensus seems more fragile now — not only because of too many demands, but because of a larger pulling apart brought on by fast growth, sharply differing agendas, a decline of the old political order and a sense, true or not, of unfairness.
I write “true or not” because today’s Seattle is an emerging world city and they are typically expensive. Yet this isn’t the Seattle so many remember or want, even if they benefit from its economic strength — and the realistic alternative is decline, not circa 1990 stasis.
Everyone wants “inclusive growth.” But it can’t come from city taxes alone, especially administered foolishly.
It’s a national, indeed international, challenge requiring much more wide-ranging responses. Among them are universal health care, improving poor schools, providing free childcare for the poor and finding the way to replace the rungs lost in the opportunity ladder.
Nobody has all the answers. Be suspicious of those who claim they do.