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Tax the rich? Trump-Proof Seattle coalition makes push for city income tax

Homelessness, affordable housing, addiction, education — You can stop pretty near any barstool discussion of progressive policy in “liberal Seattle” cold in its tracks with this gem: “Too bad Washington doesn’t have an income tax!”

Wednesday, a coalition of advocacy groups visited City Hall to make the case that Seattle should go it alone with an income tax on high earners. Led by the Transit Riders Union, the Trump Proof Seattle coalition says it wants to create a new income tax in Seattle that would institute “a 2.5% tax on unearned income, comprising capital gains, interest and dividends” and households “with total (adjusted gross) income over $250,000.” Advocates say they could move forward by collecting signatures to put the initiative on the ballot this fall or by structuring the tax so it could be carried forward by the Seattle City Council and adopted directly into city law.

District 3 representative Kshama Sawant is a fan of moving on the new tax directly.

“We could do this as an initiative but it’s important to challenge elected officials to take a stance on this,” Sawant said at informational session on the coalition’s effort Wednesday in City Council chambers. “A lot of politicians in the Seattle area have been talking about how they’re against Trump, that this is a sanctuary city, but it’s hollow unless they actually do something to make this city affordable and livable.”

 

This map from the Seattle Times shows Seattle as one of the few areas in the state to support a Washington income tax in 2010

This map from the Seattle Times shows Seattle as one of the few areas in the state to support a Washington income tax in 2010

The coalition says estimates show the tax would affect between 5% and 10% of Seattle households and generate around $100 million per year. They also hope the tax would “pave the way for action in other cities and statewide.”

Seattle voters, meanwhile, could be a barrier. In 2016, Olympia rejected a proposed 1.5% tax on income for households making more than $200,000. Seattle did stand mostly alone in 2010, however, when the state overwhelmingly rejected a 5% tax on individuals making more than $200,000.

One way to sweeten the offer and win more widespread support could be to pair the income tax proposal with cuts to other Seattle taxes. Makini Howell, owner of Capitol Hill’s Plum family of eateries, spoke Wednesday and said taxes should be cut on the city’s small businesses and to help “put more money in the pockets” of Seattle’s low-income families.

No matter the path to implementation, if the tax were to be approved, advocates acknowledge the plan would face immediate legal challenges.

You can learn more at trumpproofseattle.org.

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RWK
RWK
4 years ago

This obviously is a long-shot. I don’t know if it’s a good idea or not, but I do think that it’s too important to be left up to the Seattle City Council and the likes of Sawant. A citizen’s initiative is the way to go…..more democratic.

anna sherri
anna sherri
4 years ago

If Trump is convicted of mortgage real estate tax fraud are the city attorneys, governor, and WSL real estate owners who own Seattle Metro real estate guilty of aid and abet by conspiracy and collusion? (Maybe REIT insider trading since the Dept of Ecology has Seattle Metro listed as a 303d PCB superfund site).
https://www.irs.gov/uac/related-statutes-and-penalties-general-fraud

Jack
Jack
4 years ago

Oh, I see. It’s not expensive enough to live here already.

Jim98122x
Jim98122x
4 years ago
Reply to  Jack

Don’t worry, it’s on $250k and above, so it’s somebody else’s money. Party on.

LC
LC
4 years ago
Reply to  Jack

Jim98122x, a household with an income of $250k is hardly thriving in this city.

Plus, the trumpproofseattle.org website does not even explain what they are going to use this money for.

Brando
Brando
4 years ago
Reply to  Jack

@LC – At 250k, assuming 60% take home (very conservative, but with 401k, health care, etc.), you’re talking 12.5k per month. If you can’t make that work in this city, you have serious money problems.

CD neighbor
CD neighbor
4 years ago
Reply to  Jack

Seriously LC? Fewer than 7% of Seattle households make more than $150K per year much less $250K.. Just what do you consider to be scraping by that $250K doesn’t meet your needs??

LC
LC
4 years ago
Reply to  Jack

Let’s say a household is a family of 4 bringing in 250k. Brando, I’ll use your number of $12.5k/month.

Right off the bat, $2.5k should go straight to savings leaving you with $10k.

With the median home price in the city of Seattle of $630k, that’s a monthly mortgage of $3K if you had the $125k cash for 20% down. If not, higher mortgage plus PMI. But we’ll assume you put 20% down. So now, you’re down to $7k. Add in property taxes/insurance ($500) = $6.5k.

Throw in any extras (private school, car payment, medical/home/auto emergencies, home upkeep) you don’t have much wiggle room.

I’m not saying they’re destitute, but they’re definitely not living the high life as Sawant makes it out to be.

This is the same for trying to tax a business who makes $250k/year. Just because you make $250k doesn’t mean you net $250k.

Again, they have not disclosed what they will use this money for. And punishing Seattle families for working hard and make good financial decisions will drive people away from this city. Especially when $250k will go so much further in equally vibrant cities where the cost of living is much lower.

woonerf
woonerf
4 years ago
Reply to  Jack

Ahahahahahahahahahaahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaahahahahahahahaha

Today, I heard someone complain that $250,000 per year wasn’t enough to live off of.

Jim98122x
Jim98122x
4 years ago
Reply to  Jack

LC, I’m not even interested in arguing whether $250k is or isn’t a lot of money, or who can/can’t get by on $250k a year. I make not even a fraction of that, so it won’t affect me, but I think it’s an extra-stupid idea.

To begin with I’ve had it “up to here” with this unending parade of tax increases. Savant won’t be satisfied until we just direct-deposit our entire paychecks into a tax collection fund and all work in proletariat work camps.

We need a state income tax where everybody contributes, not just trying to sock it to certain incomes or geographies. Doesn’t work. People just move. Why do you think Vancouver WA is so attractive to people who live in Portland?

There are always unintended consequences. Affluent people move out of the city (and let’s just forget about what’s “affluent” for a minute). Houses within city limits drop in value because people with options can move to avoid the tax, or they don’t buy inside city limits to begin with. (Same idea in reverse about how homes in good school districts are worth less). Property tax receipts drop, maybe not offset by this new tax. People with kids in city schools (maybe active in PTAs) pull their kids, head to Eastside suburbs. Lots of possible ripple effect. Whoever thinks this won’t chase away higher income people with more money to pump into the economy is mistaken.

chuckled reading yr comment
chuckled reading yr comment
4 years ago
Reply to  Jack

@LC So this hypothetical $250k family is saving $30k a year in addition to their 401k contributions. How is that not wiggle room?

In reality there probably are people making that kind of money that are feeling financially squeezed in Seattle, but they are not the diligent savers you describe.

Jim98122x
Jim98122x
4 years ago
Reply to  Jack

Oops… that was supposed to be about how homes in good school districts are worth MORE.

Privilege
Privilege
4 years ago
Reply to  Jack

“Affluent people move out of the city”

Rich people are leaving L.A. and San Francisco and New York in droves.

Why do people buy into this patently ridiculous narrative? The affluent can live wherever they want, and most frequently choose affluent areas regardless of taxation, of all things. If taxation was that big of an issue, you wouldn’t have an absurd concentration of wealth in California and New York, both of which have huge state and city taxes.

Or, what, all of the wealthy techies will abandon their high-rise downtown condos and their access to restaurants and bars so they can commute to/from Sammamish?

They’ll threaten it, because they’re a bunch of whiny little babies, but they’re bluffing. It’s same bluff they use when they promise job creation in exchange for tax breaks, but the breaks just drive record profits and bonuses for execs with no net gain in employment.

beekay
beekay
4 years ago
Reply to  Jack

LMFAO @ “don’t have much wiggle room” and “private school” in the same sentence.

Maybe LC forgot the “/s”

John
John
4 years ago

A very slippery slope the city is taking on that may benefit the eastside quite a bit in the coming years. Encouraging a class base to move outside of Seattle is going to effect a lot more people than one would think. Things like Expedia moving into town are simply not going to happen anymore if stuff like this passes.
Bit by bit, it smells more and more like socialism to me.

ERF
ERF
4 years ago
Reply to  John

“Bit by bit, it smells more and more like socialism to me.”

Ya think?

Pete
Pete
4 years ago
Reply to  John

Yep, Seattle is clearly a 2.5% income tax away from becoming a ghost town.

$5 donuts
$5 donuts
4 years ago
Reply to  John

I would be really happy if companies like Expedia didn’t move into town. We don’t need more overpaid tech workers moving into the City, clogging up traffic, driving up rents and contributing nothing to society but helping people become more lazy. We have enough of that.

Brian N.
Brian N.
4 years ago
Reply to  John

@ $5 donuts, how are tech workers responsible for making people “become more lazy”?

Privilege
Privilege
4 years ago
Reply to  John

For the love of all that is holy, affluent people won’t move to Bellevue just to avoid taxes. Because they could live in Bellevue today and choose not to, because it’s Bellevue.

You know where they could really live like kings? Kent! Federal Way! Everett! Exotic Tacoma! Why the affluent are just flocking to those far flung exotic places to build their dream mansions!

Todd Christensen
Todd Christensen
4 years ago
Reply to  John

Seattle is growing at 2.3% (more than 15,000 people) a year. For the last decade. Seattle saw the largest gains in incomes in 2014-2015 in the entire country. Median household income rose $9,374 to $80,369 from 2014 to 2015 (the share of Washingtonians below the poverty line fell 1 % point compared with a decline of 0.8 point nationally).

Seattle is going to do just fine.

cloey
cloey
4 years ago

BRAVO LC.

Rational
Rational
4 years ago

This will not pass muster with the state constitution. Plus is it democratic of fair to have the majority vote to take money from a minority? Why not tax everyone who has a living wage, say a 50k threshold. Not a cliff that starts at a rate that few have but all can vote on. Many would leave to other nearby cities and towns on principle and pragmatism. One does not thrive economically by being gamed and not reviewing ones options.

JRT
JRT
4 years ago

The website says this is solely a tax on unearned income (interest, dividends, and capital gains) applicable to people who make 250K and up. This may be a stupid question (and apologies if it is), but am I right that you make 250K and all of that money comes from wages (e.g., you draw a salary of like $21K a month), this doesn’t apply? As I read it, it only applies if you make some of that money through interest or stock dividends, the tax applies to that income. In other words it doesn’t directly tax people out of their hard earned money, rather, it taxes people on the money that their hard earned money earns for them as an investment? Is that right? If so that hardly seems to spark the concerns raised above about whether someone who makes $250K can afford to live here – if I’ve got this right, seems that it’s limited to “affluent” households who also invest.

angrybird
angrybird
4 years ago
Reply to  JRT

Yeah – it’s just a tax on investment income (not wages).

Greg Martin
Greg Martin
4 years ago
Reply to  JRT

Small businesses often are organized as ‘pass thru’ entities and this could apply to their owners.

Also the rhetoric of calling this a tax on unearned wealth is egregious.

angrybird
angrybird
4 years ago

I’m a life-long Seattleite and have always considered myself very liberal, but this endless barrage of taxes and money for this / money for that with very little in the way of accountability and oversight (not to mention actual results) is wearing me thin. Why is the city so continually desperate for more money? To what extent have we looked at how effectively its using its current funding to address issues such as homelessness, wage enforcement, etc… The voters of Seattle hand this city council far too many blank checks and ask for much too little by way of oversight and results.

angrybird
angrybird
4 years ago
Reply to  angrybird

Also worth noting, the source that the trump-proof group uses to support a locally-based income tax actually warns against its use (and notes that it’s use is declining, and mainly used in rust-belt cities). “While most local income tax rates are low (1 percent to 3 percent), they generally have broad bases and are difficult to avoid. State and local officials need to ensure that these taxes do not discourage economic development or drive out mobile workers and businesses. Officials must also be careful not to impose excessive compliance costs associated with these taxes.”

$5 donuts
$5 donuts
4 years ago
Reply to  angrybird

It’s because we don’t have a state income tax. Funding everything through property and sales tax is regressive, irresponsible and creates an unsustainable City to live in for the majority of people that live here.

Sloopy
Sloopy
4 years ago
Reply to  angrybird

Why is the city so short on money? You would think the coffers would be brimming based on all the tax increases recently plus the economy (since everything is sales or property tax).

On a related note, it would be nice if our elected officials paid more attention to local issues that they can influence– rather than grandstanding on national ones that they can’t.

Matthew
Matthew
4 years ago

Can’t wait to vote Sawant out. Another ridiculous idea to further push her name into the national spotlight. This wannabe Robin Hood BS will never fly. If you’re going to do an income tax it has to be for everyone. I can see different rates for different income brackets, but just taxing one sector of the citizenry is absurd.

Washington State already has the 5th highest combined tax rate in the country (https://taxfoundation.org/state-and-local-sales-tax-rates-in-2017/) You throw an income tax into that mix and the entire tax structure for Washington has to be redone on an income tax basis.

Jim98122x
Jim98122x
4 years ago
Reply to  Matthew

We had the chance to vote her out, and look what happened? She got reelected on the strength of renters who think they’re immune to property tax levies; and now they’ll vote in this tax because they know they’ll never pay it.

“The problem with socialism is that you eventually run out of other peoples’ money.”
~ Margaret Thatcher

Matthew
Matthew
4 years ago
Reply to  Matthew

Trust me Jim, I never voted for her.

Adam
Adam
4 years ago

Murray and Sawant will just keep pushing more taxes and levies down the throat of Seattleites because no one will vote them out and they know it.

I’m all for taxes to fund things we need to do, but property tax assessments are going through the roof. Mine has gone up over 30% in two years. Not only that, redevelopment should be increasing our tax base significantly all across the city. Where is all this new additional money going?  Where’s the accountability?

Why can’t we do simple things like clean up graffiti all over the city and sweep the streets, or hire the additional cops we need to walk the beat around the Hill or investigate more property crime?

But no, let’s not ask the tough questions, let’s not rationalize the programs that we’re running to see if they’re really effective against logical goals. Let’s just go after those evil rich people and feed more money into the system. And make sure to vote for the new levies this fall!

Jurgen Stultzfern
Jurgen Stultzfern
4 years ago

I think we absolutely need to get income tax legislation passed. An easy way to do this would be to set it very small – like 0.5% for residents making >$1M per year.

Then, each year, our mayor (or governor, if this can pass state muster) can slowly adjust the limits through executive order, or through our legislative majority.

Even the most staunch republi-con isn’t going to oppose a 0.5% tax on the extremely wealthy.

I know the arguments against his are “it’s not enough” – and I wholeheartedly agree – but if we can’t get anything passed, how are we going to ever attain truly fair taxation?

David Holmes
David Holmes
4 years ago

I don’t mind the taxes, but I just wish the city would take a few bucks and do a weekly graffiti removal from public spaces, along with a general litter clean-up and sidewalk power washing. I’ve never seen the city so filthy in my lifetime here, and neither have my grandparents, so we’re talking many decades. A sparkling city would make me especially open to new taxes and give me confidence that they could at least do the simple things well.