Deep in the heart of taxes - download
Photo credit: Ken Lambert, Seattle Times, 2015
On May 14, the Seattle City Council unanimously approved an ordinance to raise money for services for the homeless and construction of affordable housing, and on May 16 Mayor Jenny Durkan signed it. The legislation imposed a head tax – a simple per-capita fee paid by businesses – of $275 for each employee of the over 500 businesses with gross annual revenues of over $20 million. The approved measure cut nearly in half an initial proposal for a head tax of over $500 that had been developed over months of debate.
The final bill was expected to raise $47.4 million, down from $75 million from the original proposal.
The head tax ordinance faced loud opposition from Amazon and some other large businesses, the Seattle Chamber of Commerce, and the Downtown Seattle Association, among other groups. As soon as the law passed, they mounted a referendum campaign to repeal the tax, and reportedly were able to gather sufficient signatures to put the repeal proposal on the November ballot.
In the face of an opposition with “unlimited resources”, as one Council member put it, and the prospect of a divisive political battle, on June 12 the Council voted 7 to 2 to repeal the head tax.
Seattle faces two particular obstacles in raising funds to deal with a crisis of homelessness and lack of affordable housing in a booming economy.
The Washington state Supreme Court ruled in the 1930s that taxes on income were not permitted under the state constitution. This leaves Washington as one of only seven states that do not allow any form of income taxes. Its state and local taxation methods may be the most regressive in the country. The sales and property taxes on which they rely on primarily are now widely viewed as maxed out and squeezing middle and lower income families. This was a major motivation for the head tax proposal.
The other particularly acute issue for Seattle is that it only recently began to build out a regional rapid transit system. In 1970, when many cities were building systems with substantial federal funding, local voters rejected a major transit proposal. Finally, in 2009, Sound Transit opened the first line of a light-rail network scheduled to cover the area by around 2040. The late start means that considerable tax increases are now required to build out the system, in a period when federal funding has declined sharply. The lack of decentralized regional development hubs built around transit also makes it harder for the city to reduce pressure on housing and transportation in the central city, where Amazon and many other tech firms are now concentrated.
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I sent my paper, “Deep in the heart of taxes”, to the Seattle Mayor, City Council and other elected officials, under this cover letter:
What's all this about a head tax? Why, next thing you know, they'll be taxing necks and arms and legs and ... What? ... Oh ... never mind.- tip of the hat to Emily Litella
Attached, please find my $0.03 (inflation-adjusted) on the path forward from the head tax.
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Download “Deep in the heart of taxes” as a PDF file: