What We Can Do Right Now For Tax Fairness

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Washington has the most regressive tax system in the country.  In Seattle, that means a relatively secure family pays 5% of their income in state and local taxes, and a poor family pays 15%. 

Those number are from 2015.  Just last week the state balanced its budget by increasing property taxes in Seattle - the median household will pay $400 more per year. And the county has proposed a sales tax increase.

When I announced, I made it clear that I wanted more equity in our tax and spending policies.  

Today I want to detail for you exactly how we could hold the line on regressive taxes, and get serious about paying for local initiatives by reprioritizing our budget and using more progressive tax options.

My first commitment is to hold the line on regressive taxes.  That means:

  1. No increases in sales taxes by the city of Seattle.

  2. Seattle property taxes would only increase with inflation. Our metric would be the total bill on a median value home, including excess levies. 

And here is how I would pay for essential needs or new initiatives:

         1. Cut unneeded spending and redirect to our priorities.

Over the last three years the city’s general fund has grown by $250 million, over 25%.  The Mayor’s Office budget alone has grown 80%, and we have seen large increases in other administrative agencies. In 2010-13 I cut 67 million from a smaller budget, while protecting core services.  

In my first year I would comprehensively review the budget to identify $30-40 million in spending reductions, and redirect it to priorities such as social services and equitable investments in our neighborhoods.

         2. For major new initiatives, ask big corporations to share the wealth

We know the city has significant needs for affordable housing and more transit.  Instead of going to the same old regressive sources, we have existing tax sources to pay for new initiatives. Here is where I would look:

Employee Hours Tax. A $100 per employee tax on big corporation, while exempting small employers (e.g., under 50 employees) could raise $30-40 million a year.* 

More Progressive B&O tax. The city can raise the exemption for small businesses (currently $100,000) while increasing the rate on large corporations. The city projects $270 million in B&O taxes in 2018. Based on this, it is reasonable to expect that modest changes in rates plus an increase in the exemption could yield $30-40 million a year.

Without any changes in state law and with existing sources, the city could fund $90-120 million a year in new initiatives for affordable housing, social services or neighborhood basics -  just by tapping into the extraordinary wealth being created by our big successful corporations.

        3. Identify new progressive revenue sources and test their legality.  

I am committed to doing the work needed to pursue and test the implementation of the following progressive revenue ideas:

  1. Income tax

  2. Tax on speculators

  3. Tax on vacant properties

  4. Tax on wealth or capital gains

  5. Municipal bank

All of these sources deserve the full weight of the mayor’s office. I believe that these are policies that are worth fighting for, and that the City could use them to replace regressive taxes or support progressive initiatives.

But we also need to be realistic about how quickly we can bring such ideas online, if at all. Under Washington law, cities may only adopt taxes specifically approved by the state legislature. For these new ideas, we can expect legal challenges, which will take time.  That is why it is so critical that we have a plan for which there can be no legal challenge - because our needs cannot wait for action, nor can we keep relying on regressive taxes.

TL;DR:

Based on my experience as Mayor, I know that from my first day in office I can

  1. Hold the line on regressive taxes

  2. Cut unneeded spending and redirect it to our priorities

  3. Ask big successful corporation to pay for new initiatives

  4. Work to identify and craft new progressive tax options, and test their legality. 

We know that something has to be done now to relieve the taxpayers of the burden they’ve shouldered for too long. The answer to all of our problems can’t continue to be tax increases on the very people who need the most help and who make this city thrive.

There is an unprecedented amount of wealth and growth in this city, and if we want to ensure that everyone can afford to stay and enjoy it, we need to make big changes, and we need to make them quickly.

 

*References on Tax Estimates

  • Employee Hours Tax.  In 2014, City Council Central Staff estimated that there were approximately 385,000 taxable FTE’s in the City of Seattle.  More recent data identifies 415,000 employees within the city.  The exact amount of revenue that could be raised depends on how many smaller employers are exempted, and the rate. After exempting smaller employers, 300,000 FTEs at a rate of $100 could raise $30 million, at $150 could raise $45 million.  Or 200,000 employees at $150 could raise $30 million.

  • B&O tax.  The city is projected to collect 270 million in B&O taxes in 2018. A 2016 revenue update from the City Finance Department showed that a 3.2% increase over two years would generate $8 million a year.  For industry, that was an increase in the rate from .00219 to .00222, for services from .00415 to .00428.  Seattle currently exempts the first $100,000 of income.  Other cities go higher.  As with the Employee Hours Tax, the exact rate required depends upon how much we expand the exemption and the amount to be collected. The estimated amount of $30-40 million is reasonable in light of the total amount currently collected and the authority to increase rates with a vote of the public.