A Very Taxing Subject
By Jean Godden
It was Ben Franklin who said nothing's certain except death and taxes. But today we tend downplay death and focus on taxes: Are they fair? Are they needed? Who should pay?
We're asking those questions now that the Seattle City Council is once again considering a head tax. The Progressive Revenue Task Force, an ad hoc group assembled by the council, is recommending an employee hours tax that figures to raise as much as $75 million a year. The task force augmented its final report with a batch of other money-raising ideas, including a city estate tax. In other words: both death and taxes.
The task force was co-chaired by councilmembers Lisa Herbold and Lorena Gonzalez and included representatives of service and housing providers, as well as former and current homeless individuals. There was one labor representative and three members who had some business ties.
A head tax isn't new to Seattle, but it has a misunderstood history. That tax was part of a 2006 transportation package known as "Bridging the Gap." The package included a property tax levy, head tax and doubling of parking lot taxes.
From the first, the 2006 head tax, levied on drivers commuting alone into the Seattle, was problematic. It was difficult to administer and collect. Businesses hated it. They argued that, with the economy improved and other revenues increasing, the head tax wasn't needed. Businesses considered the head tax a nuisance and "a job killer."
Although I had not been a big supporter of the head tax, I was skeptical that repeal, rather than possible reform, was a good idea. At the time, I was in my second term on the council, serving as chair of the Finance and Budget Committee. During budget discussions, I kept warning fellow councilmembers: Repeal the tax and you'll lose a future revenue source.
But I might as well have been howling during a Seahawks rally. The only vote against repeal was cast by the late Richard McIver, who believed that, although not perfect, the tax might be needed in days to come. Even Councilmember Nick Licata, who customarily voted for higher taxes, voted for repeal.
No sooner was the repeal vote taken in late 2008 than the national economy tanked. The recession, second only to the 1930s Great Depression, arrived in Seattle. Our biggest bank, Washington Mutual, was collapsing; home mortgages were underwater and sales and property tax receipts were sagging. At the city, we were strapped for funds and could have used that discarded head tax.
Since then, the head tax story has become distorted. Some say repeal was "due to the recession." But given the recession's blow to city finances, that explanation is not only incorrect, it's ridiculous. What do you do when you don't have enough money to balance a city budget, cut a source of funds? Not likely.
The latest push for a head tax is likely an irresistible force. Officeholders are talking it up. It is seen as a way to help alleviate the homeless crisis. The suggested plan is to include businesses that gross over $5 million and to triple taxes suggested earlier -- up to $450 per employee each year, with smaller business paying a flat $395 as "skin in the game." Tax receipts -- estimated at $75 million -- would be apportioned with 80 percent going to housing and 20 percent to shelter and services. This quest for more funds for homeless housing is worthy, but $75 million is unlikely to make a significant difference.
Furthermore, there are unintended consequences to think through. Wouldn't a per employee tax tend to mean a reduction in jobs? And wouldn't employers in labor-intensive industries -- say grocery chains, restaurants and apparel stores -- be hit hardest. And wouldn't those industries be likely to boost grocery, food and clothing prices to offset taxes?
In this state's jerry-rigged tax structure, it is difficult to find a tax that somehow doesn't place a large burden on low-income families. Addition of a head tax -- to be paid for by city businesses, already shouldered with the nation's highest minimum wage and with strict scheduling rules -- is an argument for job reduction and relocation of large employers.
These are some of the questions and concerns that the Seattle City Council must consider before taking a vote on a head tax, perhaps sometime in May. What our elected representatives decide matters to all of us. It's as certain as death and taxes.
I"m always a little surprised when I read articles like this by "tax and spend" bureaucrats. I don't have time to write an eloquent response, so I'm just going to say this " When the private sector is tanking, and private employees are losing their jobs, you seem to think that government revenue should be immune to the economic winds that everyone else must suffer. Why do you think that government taxes should go up (to keep tax revenue constant) when the private sector is suffering? Isn't that a little bit like government being the parasite that kills the host?" The head tax is a bad idea. It's hard to administer, it's likely to drive eastside consumers to Bellevue instead of Seattle, and it's just unnecessary. How about if the Seattle Council spends more time working on spending tax receipts in responsible manner? Eliminate waste and fraud, stupid projects, adopt a balanced budget, etc. Citizens don't trust the current Council because they've never seen a tax that they didn't like.