Is the City of Seattle going to ruin their economy with the new head tax?

by DCG

government solve all problems

Last week the Seattle City Council approved a new head tax on big businesses. The tax is an amount businesses pay per employee ($275 per year), with a sunset clause of 2023 (don’t hold your breath that this tax will actually cease to exist at that time). The head tax was approved by a unanimous vote.

I’ve told you what has led up to this head tax vote. See the following:

Amazon had strong words for the Seattle City Council as it questions its future in the city. “We are disappointed by today’s City Council decision to introduce a tax on jobs,” Amazon Vice President Drew Herdener said in a statement.

More from King5 News:

“Herdener said Amazon, which had paused planning on two downtown Seattle office towers pending the outcome of the vote, would resume construction planning on one of them — Block 18. The 17-story building, which will have 1 million square feet of office space, is meant to house between 7,000 and 8,000 new employees.

But he said Herdener then went on to suggest Amazon’s expansion in the city may be curtailed.“While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”

Herdener then turned the tables, suggesting the people holding the city’s purse strings are the problem.

“City of Seattle revenues have grown dramatically from $2.8B in 2010 to $4.2B in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem – it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better,” Herdener said.”

Starbucks also wasn’t too happy and had harsh words for the city:

“The company released this statement, attributed to John Kelly, senior vice president of Global Public Affairs and Social Impact at Starbucks:

This City continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside. If they cannot provide a warm meal and safe bed to a five year-old child, no one believes they will be able to make housing affordable or address opiate addiction. This City pays more attention to the desires of the owners of illegally parked RVs than families seeking emergency shelter.”

Author Travis H. Brown, MBA (read about his background here), predicts that the council just voted to ruin their economy. Travis is the author of several books including “How Money Walks.”

Travis wrote an opinion on Saturday entitled, “How Seattle’s new tax to fight homelessness could ruin its economy.”

Travis describes the city’s actions as shortsighted and a zero-sum game that will do more harm than good.

Excerpts from his piece at MSN:

“These are laudable aims (end homelessness and build affordable housing), but it’s hard to imagine a more destructive strategy for realizing themThe potential damage to Seattle’s economy from this blunt instrument runs into the billions of dollars. Some may believe that California businesses could still flee their high-tax environment for Seattle, but in reality, Seattle is competing with many other cities for this income. One example is Phoenix, which has posted the best income growth of any Metropolitan Statistic Area (MSA) since 1992. Phoenix has capitalized on its proximity to California by luring businesses and people with a low-tax environment that nets them $1,539 in income every single minute. Compared to Seattle, this is nearly $1,200 more per minute, or $70,348 more per day. The numbers are staggering, and Seattle can’t risk putting itself further behind.

Seattle’s $20 million benchmark for the new tax refers to gross receipts, not income, meaning it will hit high-volume, low-margin businesses (think grocery stores or construction wholesalers) just as hard as more lucrative counterparts, promising price increases for consumers as businesses pass along costsService industries with big headcounts are firmly in the crosshairs, threatening this key employment category for young and low-skilled workers.

Amazon isn’t the only big employer eyeing the exits. Real estate portal Zillow, another new economy trailblazer, faces millions in additional tax burden. Alaska Airlines, Expedia, PayScale, Whitepages Inc., and Coinstar opposed the tax in vain, pleading in an open letter to the city council and mayor that taxing companies for creating jobs is like “telling a classroom that the students who do the most homework will be singled out for detention.”

Perhaps the most frustrating part of this exercise in illogic is the city government’s failure to enact other commonsense measures to combat homelessness: zoning reforms and infrastructure improvements to facilitate construction of affordable housing; shifting funds from underperforming shelters to ones that deliver; and coordination of the city’s homeless strategy with other municipalities in King County.”

Read his whole opinion piece here.

The background of the Seattle council members:

  • Lisa HerboldHas been working for government politicians and government agencies since 1997.
  • Bruce Harrell: An attorney who began working in “public service” in 1979 by working for the Seattle City Council.
  • Kshama SawantA SOCIALIST.
  • Rob Johnson: A progressive urban planner and transportation advocate who spent ten years working for a statewide nonprofit coalition before working for government agencies.
  • Debora Juarez: A lawyer who concentrated on providing legal and financial counsel to Native American tribes.
  • Mike O’Brien: Served as CFO for a law firm prior to election to city council in 2009He likes to silence constituents.
  • Sally Bagshaw: First elected to the council in 2009. She began her legal career by working for government agencies and has been working in the public sector since.
  • Teresa Mosqueda: Came to Seattle City Council following a long career effectively advocating for working families.
  • Lorena Gonzalez: Came to Seattle City Council with a decade of experience as a civil rights attorney and community advocate.

Somehow I don’t doubt that business leaders at Amazon, Starbucks (and all the other businesses against this head tax) and Travis know more about Econ 101 than any of the professional advocates/public servants and taxpayer money grabbers on the Seattle City Council.

DCG

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