“You know what?” Katie Wilson said. “This city is filthy rich.”
The crowd laughed a bit. Can you say that when you’re mayor? Should you say that?
The city’s new social housing tax, levied on lofty pay packages to pay for public housing, was due Jan. 31. The startling news was that it blew the projections out of the water.
When the 5% tax on salaries and compensation above $1 million passed a year ago, its backers estimated it would bring in $50 million annually. Later the city’s finance department used state employment data for a more rigorous finding, and came up with $65.8 million.
But it looked precarious.
“The increase to the payroll expense tax … could cause businesses to change their hiring behavior to avoid taxation — such as moving existing employees to locations outside Seattle,” a report to the City Council said.
Conclusion: There’s “a large amount of uncertainty,” said the office of economic and revenue forecasts. The tax could collect anywhere from $39.2 million to $80 million, “but even larger variance cannot be ruled out.”
“Larger variance” is once again the story of just how rich we are. Because tax collections came in at $115 million — 75% higher than the estimate. And 44% over the top of the range.
It means several things about our city — all of which inform the debates currently raging about tax-the-rich efforts in our state.
One is that Seattle’s plutocrats are wealthier than anyone imagines. This keeps getting revealed, where a scheme is developed to tax wealth, and then the amounts the tax brings in wildly overshoot even the most optimistic forecasts...
Another thing is that Seattle businesses obviously did not flee.
This is interesting because the social housing tax should be one of the easier taxes to avoid. You only have to work at least half the time outside the city — in an office across the lake in Bellevue, for example.
If you make, say, $1.1 million, the social housing tax paid by your company would be $5,000 (5% of the $100,000 above $1 million). It’s probably not worth moving an executive due to five grand.
But one making $10 million? The tax on that is $450,000. $30 million? The tax hits $1.45 million.
As I wrote last year, it’d be cheaper for Amazon to fly its top execs to Bellevue in a helicopter three days a week.
They did not take me up on this strategic advice, apparently. In fact, the 5% tax is being paid by 170 Seattle companies, according to the social housing agency. (The tax is paid by companies, not individual workers.)
So are the rich set to bolt the city or the state to get away from tax-the-rich schemes? Last week at a hearing on a proposed state “millionaires income tax,” Redmond hedge fund manager Brian Heywood, who himself fled California’s taxes, testified he knows of “about 50 couples who are already in the process of, or soon to be changing, their domicile, out of this state.”
That is a lot. I’m not sure I know 50 couples period, let alone 50 couples capable of taking such decisive action. Another way the rich are different than you or me.
The press has been filled with anecdotes of wealthy people decamping. Yet someone’s got to be hanging on here paying all these taxes — the totals of which keep racking up dramatically higher than expected.
One tech exec finally emerged to argue the fleeing-from-Seattle talk is bogus.
“The math doesn’t math,” wrote Jacob Colker, a Seattle AI venture capitalist. “Should we be thoughtful about tax policy? Heck yeah. Should it be tied to better stewardship of spending? Darn right. But the breathless narrative that Seattle is one bill from collapse is not serious analysis.”
My sense is taxes work when rates are reasonable. Single digits, like the 5% social housing tax, are not killer rates. Maybe the rich say “ugh, I don’t like it but oh well, it’s not worth uprooting my life.” So far, it hasn’t been worth even driving across the bridge.
On the other hand, Democrats last year jacked the top estate tax rate for the super-wealthy, to a gouging 35% for wealth north of $12 million. Some of those are said to be fleeing Washington, and who can blame them? There’s no good to come from fleecing people. This extreme rate situation has set off enough alarms that state Democrats now have a “tail between their legs” bill to unwind that rate back to where it was set for years, 20%.
Point is, keep it cool, lawmakers, and the rich can abide.
by Danny Westneat, Seattle Times | Read more:
Image: Dean Rutz
[ed. I'm all for taxing the super rich, but c'mon, get serious liberals. The solution to every problem is not taxing everyone and everything in sight (or immediately jumping to extremes on public issues, like 'Defund the Police' - one of the dumbest initiatives imaginable). Washington is one of the taxingest states in country, mitigated only by the fact that there's no state income tax (although there's continual chattering about 'fixing' that), with some of the most regressive sales taxes in the country as well. Fortunately, some people seem to be coming to their senses - see also: WA Democrats consider retreat on estate tax, fearing wealth exodus (ST):]
Democrats in the state Legislature have generally dismissed warnings that new taxes on the very wealthy might lead multimillionaires to flee to lower-tax states.
But some are now acknowledging that one tax-the-rich policy they approved last year — a big increase in Washington’s top estate tax rates — may have backfired...
The problem for Washington isn’t just a single shift like the estate tax, Carlyle said, but an “aggregation of taxes” adopted swiftly in recent years, including new business and payroll taxes.
Democrats in the state Legislature have generally dismissed warnings that new taxes on the very wealthy might lead multimillionaires to flee to lower-tax states.
But some are now acknowledging that one tax-the-rich policy they approved last year — a big increase in Washington’s top estate tax rates — may have backfired...
The problem for Washington isn’t just a single shift like the estate tax, Carlyle said, but an “aggregation of taxes” adopted swiftly in recent years, including new business and payroll taxes.
“What people I think are failing to recognize is that tipping-point scenario,” he said, which would lead the state to lose the entrepreneurial advantages that have led to the growth of companies like Amazon, T-Mobile and Starbucks.
