Written by William Hillis, Research Editor, RSIR
Reflections on the head tax enacted by the Council
If you were raised before the Game Boy generation, you’ll probably recall the story of “The Fisherman’s Wife” from Grimm’s Fairy Tales. This familiar fable is that of a fisherman who spares the life of a wish-granting fish. The poor troller is then brow-beaten by his wife into calling upon the fish for progressive improvements to the family hovel and his wife’s social position. When the wife’s demands reach the point of blasphemy, the fish renounces all the upgrades, returning the aspiring couple to their humble beginnings.
And that may be what will soon happen to the Seattle City Council.
We seek to tone down political bias and don’t often make predictions on these matters, but what happened earlier this week is a strategic blunder that is sure to arouse dismay among current Council supporters and to drive changes at the ballot box later next year (2019). It was an overambitious move by the Trotskyite faction on the Council that is likely to strengthen the hands of local businesses on local government tax, housing, and development policy.
Here are several reasons why:
- The head tax will ensnare smaller fish, with little effect on big ones. Despite the near-universal focus on Amazon, the head tax will impact 585 businesses in Seattle. Those hardest hit will be high-volume, low-wage businesses like Dick’s Drive-In, as CEO Saul Spady explained to KING5 News. The fact that low-wage workers will end up on the short end of the head tax is entirely consistent with other recent Council initiatives, such as the $15 minimum wage, that perversely reduce the employment of those they are intended to help. The Council’s 2017 effort to impose a constitutionally prohibited income tax on high earners was overturned by the Washington State Supreme Court.
- Head tax revenues will not deliver new housing soon, if ever. Little attention has been given by the press as to how the proceeds from the tax will be used. The original compromise plan proposed by Mayor Jenny Durkan would first allocate revenues to fill budgetary deficits in existing shelter and “vehicular living” programs. Durkan aims to get the homeless into shelters immediately, while Council members speak of long-term solutions. Yet the spending plan adopted by the Council will not fund even 600 units of housing; while a year ago, there were already more than 8,500 homeless on the streets of Seattle. The tax has therefore set the table for interrupted hiring by high-volume businesses before any new affordable housing opens to residents.
- The tax is the latest in a series of Council measures out-of-sync with the region. In proceeding from one ill-considered act after another, the Seattle City Council has gone their own way, scarcely bothering to consult with other municipal governments in the region other than King County. While this may appear to enhance the competitive positions of cities nearby, it also muddies the water for prospects. The mayor of neighboring Bellevue said, “Businesses make their decisions on where to locate based on lots of different data points,” adding that “One of those is the tax system, but they make that decision based on a number of different data points. From my perspective, if there is someone who wants to move within the region, our doors are certainly open to them in Bellevue but … we want to make sure that we show that the Puget Sound region has a really strong economic climate.”
- The head tax ignores the most obvious and least costly solution. The one fix that would actually resolve Seattle’s housing shortage—upzoning some of the city’s single-family neighborhoods to multifamily densities—would spur condominium investment to meet burgeoning demand. Yet residential zoning remains politically contentious and untouched by the Council.
Dean Jones, President of Realogics Inc., says that what is most needed for more affordable housing is more housing generally, delivered by the private sector. “Supply is king. The Council should absolutely offer greater incentives for developers to play their role and contribute to a fund to build housing and subsidized communities for homeless in transition.” Instead, the City has settled upon a distraction that embitters employers, further threatens entry-level employment, and adds insufficient new housing.
So current and would-be homeowners, take heart. If the city’s voters haven’t already been brought to their senses, a failure of the head tax to produce meaningful results might finally convince them.
 Greg Copeland, “’How is that a compromise?’: Iconic Dick’s Drive-In slams Seattle head tax,” KING5 News, 15 May 2018.
 All Home, Count Us In: Report Release, http://allhomekc.org/wp-content/uploads/2016/11/COUNT-US-IN-Presentation-_-May-31-2017.pdf
 Erica Barnett, “Six Things to Consider about the Head Tax,” South Seattle Emerald, 16 May 2018, https://southseattleemerald.com/2018/05/16/six-things-to-consider-about-the-head-tax/; https://thecisforcrank.com/category/city-council-2/.
 Monica Nickelsburg, “After Seattle passes ‘Amazon tax,’ mayor of neighboring city says ‘Bellevue is open for business’,” Geekwire, 15 May 2018, https://www.geekwire.com/2018/seattle-passes-amazon-tax-mayor-neighboring-city-says-bellevue-open-business/.