An old axiom is that if you want less of something, tax it. Hence, high taxes on cigarettes to discourage smoking.
It was one of my concerns when the City Council passed its JumpStart Seattle payroll tax on big businesses in 2020. The risk was that it would fail to achieve its promised revenue, while putting the city at a competitive disadvantage versus other cities in King County, especially Bellevue.
But as my colleague Daniel Beekman reported in February, the tax yielded $231 million this past year, beyond an estimated $200 million.
Although sold as a tax on Amazon, it swept up around 300 companies, those with at least $7 million in annual payroll. With rates ranging from 0.7% to 2.4%, it applied to salaries paid to workers making at least $150,000 annually and working most of the time in Seattle whether in the office or remotely.
Now JumpStart is projected to bring in $277 million this year, according to the city’s new Economic and Revenue Forecast Office.
“Our economy is rebounding and there’s good reason to be optimistic about today’s baseline forecast projections,” stated Councilmember Teresa Mosqueda.
“Today’s forecast shows that, largely by raising progressive revenue as opposed to imposing austerity, we can build future budgets which assume that industries, jobs and small businesses will continue to recover,” she said, adding that the JumpStart revenues mean “that more investments will be able to flow into economic resilience, building housing, and investing in green/equitable development.”
I’m happy to have been wrong. When the facts change, I change my mind, to paraphrase a quote attributed to John Maynard Keynes. And it’s a scandal that Washington doesn’t have a personal or corporate income tax (it does have a complicated business and occupation tax).
Wrong, at least about how much money the new tax would generate. What about jobs?
Seattle’s employed labor force totaled 483,632 in March, according to data from the state Employment Security Department, as compared with 454,869 for the same month in 2021 and 463,193 in pre-pandemic, pre-JumpStart 2019. The city’s unemployment rate was 2.1% this past March, well below what economists consider “full employment.”
Add commuting, and the most recent figures for jobs in the city of Seattle were 763,833 as of September 2021. That’s nearly 108,000 higher than the same month in 2020.
As a result, it’s difficult to make a case that the tax hurt job creation in the city beyond the 2021 dip (which could be attributed to COVID-19 and other factors, too). The latest employment number for Seattle is a record high.
It’s also uncertain that Bellevue gained jobs at Seattle’s expense. The suburb’s employed civilian labor force totaled more than 82,000 as of March. That compares with 77,141 for the same month in 2021 and 80,273 in pre-pandemic 2019.
Again, I’m happy to have been wrong.
Still, Amazon, the target of the City Council majority’s antipathy, has stopped adding new jobs to the 50,000 it has in its Seattle headquarters. It plans to create 25,000 jobs in Bellevue (where it now has 7,500, along with 1,400 in Redmond), as many as it plans to have at HQ2 in northern Virginia.
According to the tech site GeekWire, Amazon CEO Andy Jassy says “First of all, we don’t think of HQ1 being Seattle any longer. We really think of it as Puget Sound. We have a lot of people in Seattle, but we also have a lot of people in Bellevue and it is where most of our growth will end up being.”
GeekWire also reports, “Meta, TikTok parent ByteDance and other tech giants are also scooping up office space on the Eastside. Tech recruiters say it’s becoming much easier to recruit talent to Bellevue, once a difficult place to pitch to young tech workers who would rather be in Seattle.”
I suspect much of this Bellevue advantage is lower crime, no tents on sidewalks or encampments, and police who respond to “quality of life” calls that SPD won’t or can’t.
Violent crime and property crimes have skyrocketed in Seattle, while the Police Department is down 375 officers.
On the plus side, in addition to being home to two of Big Tech’s top five, Puget Sound, or the Seattle area, sports 16 “unicorns” — tech startups with a market valuation of $1 billion or more. Not all are in the city.
But maybe this situation is enough for the Council majority, although new Mayor Bruce Harrell and Councilmember Sara Nelson are much more focused on crime and economic development. Respondents to a poll sponsored by the Seattle Metropolitan Chamber of Commerce said they were unhappy with the city’s handling of crime and homelessness by decisive margins.
Maybe a healthy backlash has started.
The most important answer to JumpStart will be how the money is spent.
Will it actually provide shelter, as well as addiction and mental-health aid, to address the homeless crisis? Or will it go to politically connected social-service providers with no incentive to reduce the unsheltered population?
And because no wall surrounds us, Seattle, like other West Coast cities, continues to see a rise in this cohort. Homelessness has many deeply complex causes.
But some people engaged in an anti-social “lifestyle” are attracted to a place with a stood-down police force, a look-the-other way attitude on drug possession and abundant services. I learned the term “Freeattle” from these folks, not from reactionaries living in the suburbs.
So, prove me wrong again. Please.