Should Seattle have an income tax?
Along with budgets cuts, fairer, more sustainable city funding, especially in hard times, is worth exploring.
By Knute Berger
July 19, 2010.
The state, county and city are facing more budget deficits. Revenues are trickling in, the economic turn-around (if it's even happening) is sloooow and there are danger signs of a double-dip for the Great Recession.
A sobering report on the "job gap" from the Brookings Institution says that for the U.S. to get employment back where it was before the bust in 2008, and to accommodate all the new people entering the workforce (like those kids graduating from college), it will realistically take 11 years. So, happy days might be here again, in the year 2021.
In other words, don't look for a fast end to the economic slows.
This means we're going to have to get used to doing with less, especially from local government. The question is, how much less?
The city of Seattle is facing an estimated budget hole of $56 million next year, and $53 million the year after. That's going to mean big cuts, layoffs, and adjustments to labor contracts and other rules that are costly.
But what about working both sides of the equation? I think we'll have to raise revenues as well. And that's going to be hard, not only because no one likes paying higher fees and taxes in good let alone downtimes, but because the city has relatively few options.
To raise revenues, McGinn says the city will look at loosening rules about placing advertising on public spaces (like bus shelters), and looking for commercial opportunities in parks, such as leasing space for cafes or other appropriate businesses. The focus on finding a paying customer for the old Fun Forest space at Seattle Center is likely to be a standard for the near future. (I suggest that if you want to put ads at bus stops, the awful metal benches would be a great place to advertise hemorrhoid cream.)
McGinn has also proposed raising the parking tax and the fees on car tabs.
The business community generally doesn't like anything that makes it tougher for drivers, because retail in Seattle still largely relies on the car. And it's not like Metro doesn't have huge financial challenges for expanded service: we're unlikely to see more bus transit in the short term.
On the other hand, taxing vehicles and parking helps further the city's and McGinn's longer-term vision of re-socially engineering the city into one that is less dependent on cars. Many suburban Seattle cities have boosted tab fees to help with roads, according to the Seattle Times, including Edmonds, Shoreline, Lake Forest Park and Des Moines.
But there is a tug-of-war. The city council, for example, has touted its repeal of the city head tax as being a way to help business. That cut a revenue stream at a time when every trickle counts. There's a dilemma: how do you raise revenues without making other problems worse, or beating a dead tax horse?
The problem is, over time, Seattle might need a lot more money, especially to fund basic services, like parks, roads, libraries, and public safety. You can cut expenses only so far. How do you work the other side of the equation? The city has a set of state-approved taxes that it can tweak, including the B&O, property tax, sales tax, real estate excise tax, parking tax, vehicle license fees.
McGinn wants to raise the last two, but some of the others are even more problematic. The B&O tax hurts small business at a time when they need more support, and small business is the great job generator. Raising the sales tax makes an already regressive tax worse.
McGinn points to Washington's tax system as one of the least fair in the entire nation, with the richest residents paying the smallest percent in taxes, and the heaviest tax burden falling on those who make the least. As of last week, the I-1098 ballot measure has officially qualified for the November ballot. This is the Bill Gates, Sr.-backed measure that would exempt small business from the B&O tax, cut property taxes by 20 percent, and impose an income tax on the state's highest earners, the 3 percent of us making $200,000 or more per year ($400,000 for couples).
If the state high-earners tax passes, it would help rectify the regressiveness of the state tax system, and relieve a major burden for small business. But could it also open a door for a comparatively tax-friendly Seattle to revamp its own tax system? The state controls what taxes a city can charge, but if I-1098 passes, Seattle conceivably could go to Olympia and ask the the authority to impose its own high-earners income tax.
The point would be to raise taxes on the people who are doing well even in hard times, to begin shifting the city's tax burden to a fairer system, and to find sustainable revenues to maintain and improve city services even as budgets are trimmed. Many major cities have wage, employment, or occupational taxes on individuals, employers or businesses as part of the mix, including New York, San Francisco, Philadelphia, Indianapolis, Baltimore, and Portland (Multnomah County).
Seattle voters have proven to be willing to spend for major public benefits. Despite the Great Recession, we are an affluent city, with aspirations to be a fairer city. Could tax reform at the state level trickle down to the municipal level? It's a possibility that should be actively explored.
Comments:
Posted Mon, Jul 19, 6:55 a.m. Inappropriate
A Seattle City Income Tax on all those who live and work Seattle sounds like a super idea...for commercial areas outside the city. When there is a reasonable alternative location for businesses to operate in the face of an Income Tax and all of the other tolls, taxes and fees coming down the pike, the businesses will move.
Posted Mon, Jul 19, 7:02 a.m. Inappropriate
Isn't income tax within the state's purview, & not local government?
Posted Mon, Jul 19, 7:50 a.m. Inappropriate
I am of two minds regarding a city income tax.
First, I don't think Seattle has the sticking power other cities with an income tax have (think NYC). Its too easy to just cross Lake Washington and live or work somewhere else. If Bellevue, Redmond and Tacoma didn't exist, then maybe, but they do.
Second, if its just on the rich, and if they all leave town, then great! Maybe housing prices will return to a level that regular people can afford instead of the absurdly inflated housing prices ($300,000 for a one-bed 600 sq ft condo?) that only the rich and without kids can afford.
Posted Mon, Jul 19, 9:03 a.m. Inappropriate
Why not have a modest subscription fee for the library? A modest annual user fee of say $10 or so could perhaps allow services to be restored, and could be managed as part of the library card system.
Posted Mon, Jul 19, 9:10 a.m. Inappropriate
We don't have an income tax, yet, and you're already wanting to expand it? Naughty, naughty...
Posted Mon, Jul 19, 10:15 a.m. Inappropriate
Come on, Knute - your chasing moonbeams. You know there is no STATE income tax - and who in their right mind in Olympia would give McGinn the income tax. Did you read Joel today? Enough said.
Ross Kane
Warm Beach
Posted Mon, Jul 19, 10:49 a.m. Inappropriate
700-800 library staff, hundreds of strategic planners, patronage, neighborhood department staff, 'spokepeople' by the dozens, women's rights, senior services staff, civil rights bureaucrats, the list goes on and on of many non-essential employees with huge benefit packages who are not missed on holidays and snow days. 1500 of Seattle's 11,500 employees should look for productive work elsewhere. NO INCOME TAX.
Posted Mon, Jul 19, 1:37 p.m. Inappropriate
And yet when the time comes to cut employees, the only jobs they can find to cut are police and prison guards.
Posted Mon, Jul 19, 3:45 p.m. Inappropriate
California has a sales tax AND income tax. How's it workin' for THEM??
Posted Mon, Jul 19, 4:37 p.m. Inappropriate
An income tax on $200,000 today is an income tax on $20,000 ten years from now. Mark my words. This is how politicians operate--they love to be generous with OTHER PEOPLE'S MONEY. And I'm sorry, wasn't one of Mayor McGinn's first official acts as mayor to propose replacing ALL OF THE CITY'S COMPUTERS WITH MACS??????? I nearly choked on my organic soy flakes when I heard that one...
Now here's a little something that y'all probably already know, but I jsut learned--and I STILL can't figure this one out: Do you know that residents of Oregon need only flash a valid driver license and they DO NOT HAVE TO PAY ANY SALES TAX WHILE SHOPPING IN WASHINGTON??????!!!!!!!! WTF is right. Yet, the politicos want to impose an income tax... the tax genie does not go back into the bottle--surely you've seen the '50s sci-fi thriller The Blob. It starts out as this innocent little puddle of goo... then escapes into the wild devouring everything in its path, each bit of organic matter causing it to grow ever larger. Never sated, the blob threatened to eventually devour the entire world. To be sure, taxes are necessary if you wish to live in a civilized society--but you don't want to feed the blob too much. You need to feed it just enough to keep it healthy and insure that it can continue to serve man as intended. Yes, that was a Soilent Green reference.
Continue Rocking,
BTTR
Posted Mon, Jul 19, 8:18 p.m. Inappropriate
Thanks Knute. You've just given me yet another reason to vote against I 1098. I hadn't thought of cities imposing income taxes but I can see Seattle doing it. I dont think Seattle has met a tax it hasnt liked.
Posted Mon, Jul 19, 9:24 p.m. Inappropriate
As someone who lived on the east coast in suburban Philadelphia, I can tell you that many of those cities have chased out their middle and working class populations with their city income taxes. Those have very very wealthy people and very very poor people.
Posted Tue, Jul 20, 6:22 a.m. Inappropriate
Will the last person leaving Seattle please turn the lights ON?
Posted Tue, Jul 20, 12:42 p.m. Inappropriate
@knielsen: My father grew up in Philadelphia. His niece is the only one who still lives within the city limits. Everyone else who remained in the area lives in one of the surrounding counties, or in New Jersey or Delaware. Though I favor income over sales taxes because of the latter's regressive nature, I can't help but think a city wage tax will indeed drive people out. Could be a boon for Shoreline and the Eastside, though, I suppose.
Posted Tue, Jul 20, 5:22 p.m. Inappropriate
Rather than participate in the good versus bad debate over the proposed income tax, I would like to add a thought on who should have to pay this tax. I think it is rather disingenuous to demand that only a small percentage (i.e. top 3%) participate. This is a democracy after all, and I strongly believe that all who benefit from what society and government provide should feel somewhat invested in paying for it. Progressive, regressive, flat-tax...at least some level of payment should be provided by all. That way, when anyone uses a service of government, they can think, "I helped pay for this." This perspective makes all citizens involved in holding government accountable and affordable.
Posted Tue, Jul 20, 10:34 p.m. Inappropriate
So, Spaldro, you think that someone making $15,000 a year should pay the same percentage of tax as someone making $200,000 a year or more?
The person trying to survive on $15,000 will have $450 less income, which would probably mean two months' less food.
The person making $200,000 a year will still have $194,000 left. They won't be worrying about food.
If you think that's terribly unfair to the wealthy person, I guess we have different ideas about what constitutes a civil society.
Posted Wed, Jul 21, 12:04 p.m. Inappropriate
This article contains the statement that Initiative 1098, the high-earner income tax, would “cut property taxes by 20 percent.”
In fact, Part III, Section 301 of I-1098 states, “Beginning in 2012, the state property tax levy is reduced by twenty percent of the levy amount that would otherwise be allowed under this chapter without regard to this section.” According to the Department of Revenue’s Property Tax Levy Rates chart from 2009, the state portion of the property tax makes up only 21 percent of the total property tax bill on average. In other words, 20 percent of 21 percent is slightly more than 4 percent. That’s a far cry from the 20 percent property tax cut mentioned in Berger’s article.
I believe you owe it to your readers to make a correction/clarification. After all, you wouldn’t want to mislead your readers into thinking I-1098 will, if approved, cut people’s overall property tax bill by 20 percent, would you?
Posted Mon, Jul 26, 1:47 p.m. Inappropriate
Brett,
That's exactly the delusion I've been under since I first read of I-1098 and have never seen it quoted otherwise. THANK YOU for the clarification. I resent the attempts at obfuscation and am now firmly in the no income tax camp.
Believe me, I'm in no danger of having to pay any income tax...for now. My income is far below the top 3% but I have no doubt that the state/city will, in short order, realize they can't balance the budget on the top 3% of earners. Soon enough it will be my ox that's getting gored!