What would make our fair city fairer?
by Knute Berger
Seattle entrepreneur and venture capitalist Nick Hanauer. Credit: Photo: Nick-Hanauer.com
With the $15-and-hour legislation passed by the city council and signed into law by mayor Ed Murray, I couldn't resist asking one of the new minimum wage's architects — entrepreneur Nick Hanauer — a "what's next" question: If $15 moves us toward a more equitable city, what should the next move be? What new bold initiative would make us a fairer place?
Hanauer was clear that fairness and compassion were not his primary motivations in the $15 campaign. Better capitalism was. In other words, his support for the minimum wage hike was based on his belief that it would create a righteous cycle between business owners and employees by turning workers into good customers. Prosperity and growth are the point, not fairness per se, though presumably some fairness flows from folks making better wages.
Still, he went on to answer the question saying that rich people like him do not pay their fair share of taxes in Washington. Hanauer believes we need a much more progressive tax system. An early Amazon investor, he backed the last income tax push (I-1098), along with Bill Gates Sr. The initiative, opposed by the likes of Steve Ballmer and Jeff Bezos, was handily defeated at the polls. Hanauer describes I-1098 campaign as "ridiculously unsuccessful."
Still, he says, on the equity front, getting the rich to pay more is the next Big Thing. "No high-functioning capitalist democracy has ever survived long if rich people don't pay their fair share of taxes,” says Hanauer. “There's no example of that… And Washington State stands out among the other [sic] 50 states as a place where rich people don't pay their fare share."
Seattle is stuck with a dilemma: Many of our answers to "equity" or "social justice" issues make things more expensive for the people we're purportedly trying to help.
The Metro transit measure Proposition 1, or Plan B as proponents called it, raised sales taxes and car license fees to keep service levels from being cut. Prop. 1 was sold as an essential-but-flawed must-do for low-income, working class and disabled riders who would take the brunt of service cuts. It was soundly rejected by King County voters, and did less well than the Seattle norm in some of the city’s low-income bastions. Cuts in service were apparently more popular than hikes in unpopular taxes.
Another tax request coming up in August will be asking Seattle voters to create a new parks district. Proponents rightly point out that our park system is under-funded and has a significant maintenance backlog. Because of tax limits on what it can ask for in property tax levies, the new parks district will be able to get substantially more money through its own property tax assessments. One argument former Seattle parks boss Ken Bounds made at a recent Crosscut editorial meeting was that it was really no problem because Seattleites pay less in property tax than citizens do in many other cities. In other words, there's capacity (i.e. money) there that can be tapped. The district would add roughly $200 a year in taxes for homeowners, based on a $450,000 home, about double what people pay now.
That might be a perfectly reasonable price to pay. Or not. But Bounds' argument that Seattleites are effectively under-taxed doesn't take into account the fact that the city is increasingly unaffordable for many residents already; from skyrocketing rents, for one thing, which will likely be boosted as landlords adjust for higher taxes.
Plus, the parks plan includes some hefty new line items. One of the biggest that jumps out is $3 million per year for maintenance and "activation" of the new waterfront park, a project which doesn't have final approval or a final budget (new estimates are due soon). But one thing is clear: The parks department is anticipating that the waterfront park will be a very expensive addition to the system. Downtown parks are the most expensive to run.
Universal pre-K, the new waterfront, expensive police reforms, other needed road, transit and infrastructure improvements. They all seek to improve our quality of life while putting financial pressure on those who are supposed to benefit. They might make Seattle more livable, but hardly more affordable.
One choice is to spend less, to get more efficient in some areas, show some willpower at the civic project pastry cart. That is not the Seattle way.
The other choice is to become more brave, relentless and clever at engineering an overhaul of the state tax system: closing loopholes and tax breaks, making a fairer B&O, giving localities more control over their taxes, and instituting a progressive income tax on the very wealthy. Unfortunately, that way is blocked by business lobbyists, politicians on both sides of the aisle who are afraid to make corporations pay their share and who insist on massive subsidies for some, and a cynical electorate which believes that a state income tax will trickle down from the rich to hit everyone else.
In other words, $15-an-hour is progress for workers, but too many of our city's fixes only exacerbate problems made worse by state intransigence, attempted workarounds by local officials and an over-reliance on Seattle's willingness to tax itself to do good, even if it makes matters incrementally worse for many of the very people we're trying to help. What we give with $15 we quickly take away in mitigation taxes, fees and boosted fares.
The income tax might be a third rail of Washington politics, but so was gay marriage once upon a time. Hanauer frames the importance of solving the progressive tax conundrum as a matter of long-term survival.
We have to find a way out of this bind.