Seattle starts a debate about taxing the rich on Monday. But the proposal as currently envisioned doesn’t tax who, or what, you’re probably thinking of when someone says “Seattle” and “rich.”
Cries of “tax the rich!” have been bubbling up in the streets around here for many years. On Monday, they will come down from the top.
The Seattle City Council is expected to call for a citywide income tax levied solely on the wealthy. The council vote Monday won’t impose the tax, but would put the city behind the idea and start a two-month process for crafting and approving an ordinance.
I am in the set that believes this state’s tax system soaks the poor while letting the rich off ridiculously easy. So to the extent that Seattle is about to provoke a statewide conversation on what might be a better way, that’s a good thing.
This isn’t just symbolic, though. The mayor, the City Council and various interest groups now really want to do this, to raise money for needs like helping the homeless.
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On some practical levels, the idea is loaded with problems.
Most vexing is that as conceived this would be a tax on individuals and families only, levied by where they live. So most of the stupendously rich around here — the ones that top all those billionaire lists — wouldn’t have to pay it.
Of the eight billionaires most active in Seattle, seven don’t live in the city. That includes the two wealthiest people in America, Bill Gates (Medina) and Jeff Bezos (also Medina). Rounding out the top five billionaires are Steve Ballmer (Hunts Point), Paul Allen (Mercer Island) and Bellevue video-game impresario Gabe Newell (Long Beach peninsula).
Many cities get around these obvious boundary issues by also levying the tax on income earned in the city, even if you don’t live there. To keep this one simpler, it’s expected it will only be on locals. Most important from the list above, that means Bezos and his $79 billion Amazonian fortune, all earned here, would be off-limits.
There’s also a slew of near-billionaires, such as liberal tax champion Nick Hanauer, who work in the city but live out of reach of this tax — in his case in The Highlands in Shoreline.
The proposal also doesn’t include a corporate income tax, apparently because it would be too complex. As suggested by the group Trump-Proof Seattle, instead it would levy a 1.5 percent tax on annual incomes in excess of $250,000 (so a family reporting $300,000 would be taxed 1.5 percent of $50,000, or $750).
We have to start somewhere, said John Burbank, director of the Economic Opportunity Institute in Seattle, who is spearheading the plan.
“Think of this as opening up a pathway to progressive taxation that could eventually include all those billionaires, the uber super-wealthy,” Burbank said.
His hope is that what starts in Seattle might spread statewide.
He sent me IRS data showing Seattle still has 1,700 households that made $1 million or more (that was in 2014, the most recent figures available). About 21,000, or 5 percent of Seattle filers, eclipsed the $250,000 threshold and so would have to pay some tax.
“Even without the billionaires, there are a lot of really rich people around here,” Burbank said.
The other problem is that nobody collects income tax in this state, because state law hasn’t allowed it. So even if the city wins a court case and has that ban overturned, it would have to go it alone on setting up its own IRS department at City Hall.
I paid city income tax when I was a reporter covering Congress in Washington, D.C. It was pretty easy — I just piggybacked off the numbers I’d already calculated for the federal tax forms. Even so, D.C., a city the same size as Seattle, has more than 200 employees, at an annual cost of more than $30 million, in its income tax collection and enforcement division.
Seattle’s debate on this issue starts Monday. Here’s hoping it can be improved. I’m all for some way to shake up our terrible tax system (though for years now I’ve been a fan of a different idea, a statewide capital gains tax).
But one that misses the super-rich and corporations that are most profiting from the Seattle boom? One that misses Amazon? Not sure we could even call that taxing the rich.