The Seattle City Council voted to approve a wealth tax on total income. The vote was unanimous, 9-0. The new Seattle wealth tax is 2.25% over $250,000 per year for a single person and $500,000 per year for a married couple filing jointly.
The city estimates that the new Seattle wealth tax would raise $140 million per year, and would cost between $10-13 million to set up and $5-6 million per year to assess, manage and enforce. Those figures will almost certainly prove top be optimistic, as I'll explain.
For those familiar with Seattle and what it costs to live there, the dollar guidelines for the new wealth tax target quite a few people who hardly qualify as 'rich' especially small business owners since it targets total income. Also, given the nature of Seattle's city government, this tax is likely to be raised more and more as time goes on.
One of the attractions of living in Washington State is that it has no state income tax. So there will likely be a legal challenge to the new law once Mayor Ed Murry signs it into law, since it violates the state constitution. But Washington being a Blue State, there's no guaranty it will be successful. Mayor Murry's argument is that Washington's tax system is "antiquated and regressive, causing people with less money to pay more of what they have."
The Mayor thinks it's time Seattle and the whole State "adopted a progressive income tax."
This is a curious argument, although the Left has been repeating it ad nauseum.This is not a 'progressive income tax' no matter what Seattle's mayor and his socialist buddies claim. A progressive tax affects everyone in varying degrees according to their income and situation. This one does not, only affecting people above a certain total income.
And if people are already not paying state income tax at all, how are they paying 'more of what they have?' The sales tax in Seattle has now been raised to 10.1%, one of the highest in the nation. There's been absolutely no talk about using this new windfall from the rich to lower that tax and I can guarantee you there won't be. Ditto with Seattle's relatively high property taxes, which are levied by King County anyway, not the City of Seattle. So that won't be changing either, at least not as a result of this new Seattle wealth tax.
If it becomes law and survives the legal challenge, here's what will change...Seattle's tax base. If you're a person with a gross income of $250,000, the new Seattle wealth tax will set you back a hefty $5,650, almost $500 a month.And remember, you might only come home with part of that $250,000 after federal taxes and expenses. If you're a professional or highly skilled, there's a good chance you'll move to some place like Kirkland, Renton or Kent or even a little further out and commute in. That's especially true if you live in Seattle but work for say, Microsoft in Redmond or Boeing's factory in Everett. And if you own a home or condo in Seattle, you'll either sell it or rent it if you don't need the sale to finance a new house. If you own a business, you'll either raise the prices you charge for good and services or close your doors and relocate. Especially as this levy on the 'rich' goes up, and rest assured it will.
This is very much yet another instance of the failed Blue State model, similar to Detroit, Chicago, etc. The only place this kind of nonsense can be imposed is when people have no choices available, ala' Venezuela. That isn't the case here, and what you end up with as people exercise those choices is a deteriorating tax base, less revenue and a declining city.
There likely are people willing to pay through the nose to live in the Emerald City. But I think that the numbers are unlikely to net anywhere near $140 million per year. And the city of Seattle is going to have to pay something like $15-$20 million to find that out. But hey, it's fun to got to Vegas with other people's money! If you gamble and lose, who cares?
Of course, what Mayor Murray and his socialist friends on the Seattle City Council are doing has nothing to do with actual economics. It's political red meat for their portion of the Seattle electorate.
Rob Miller writes for Joshuapundit. His articles have appeared in The Jerusalem Post, The Washington Examiner, American Thinker, The Los Angeles Times, The Atlanta Journal-Constitution, The San Francisco Chronicle, Real Clear Politics, The Times Of Israel, Breitbart.Com and other publications.
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