Taxing the rich: how Seattle leads a ‘go-local’ trend in liberal politics
Seattle is trying to tackle income inequality one local move at a time – and becoming a case study in how cities are testing liberal policies that lack traction at the state or federal level.
Ned Friend has high hopes for what Seattle’s new income tax could mean for his city.
The measure, passed by the city council in July, would impose a 2.25 percent tax on high-income – those who make above $250,000 a year, or twice that for couples.
Mr. Friend, a software engineer whose annual income is above the threshold, sees the new cash source as a way to help ease the affordability crisis that is the dark side to Seattle’s booming tech industry. He says he’s happy to pay a little extra each year if it means more revenue for the city to address homelessness and fund public education, make taxes more fair, and defend liberal Seattle against strikes from a conservative federal government.
“It shaves a little bit off my long-term investments,” Friend says, “but it makes a better city.”
In some ways, the measure is a regional issue: Seattle’s is the first income tax initiative to succeed in Washington State since its Supreme Court killed a short-lived bill in 1933.
But the policy is also emblematic of a broader trend, one in which cities with liberal leadership feel empowered to experiment with policy. From minimum wage and fair scheduling measures to plastic bag bans and sanctuary laws, cities across the nation are testing both the boundaries of local authority and the effectiveness of liberal legislation. Elected officials in blue cities – propelled by constituents like Friend, and a perception of hostility from Congress and the Trump administration – are raising income inequality, persistent poverty, and climate change to priority levels once reserved for bread-and-butter issues like infrastructure and economic development.
“We’re increasingly seeing cities attempting to engage in some sort of redistribution, pro-inclusion set of policies,” says Solomon Greene, a senior fellow in the Metropolitan Housing and Communities Policy Center at the Urban Institute in Washington, D.C. “There’s a bit of an ‘us versus them’ mentality, and … there’s a sense that we need to be able to take care of our own.”
To some degree, cities have always been laboratories for policy, both liberal and conservative. “It’s much easier to reverse a state or city law than it is to reverse a federal law,” says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, a conservative think tank based in New York. Statewide and national challenges are often more pronounced in cities and local communities, Mr. Greene notes, and metro areas often have the resources to try new approaches to problem-solving.
A squeeze that affects politics
What appears new is that, as income inequality rises, greater swaths of local constituencies are feeling the squeeze – and local leaders are responding by shifting their focus to solutions that reflect those concerns. A Boston University report this year found that mayors more frequently mention poverty, affordability, and income disparity as top policy priorities than they did even two years ago.
There’s also been a values shift among many urban residents, Greene says. “There is a desire to live around a greater diversity of people, a celebration of racial and income diversity, diversity of nationality, and the sense that this generates innovation and a vital, thriving living environment,” he says. “There is the economics behind it, but there’s also changing preferences.”
Seattle is an apt place to experiment on liberal policy.
The city is home to the “Fight for $15” movement and a liberal stronghold in a state where the Cascade mountains act as a natural divide between Republican and Democratic regions. Citizens like Friend champion a mode of thinking that celebrates individual participation in advancing a common good: “I see it as, the vibrancy that these funds will provide will make up the personal cost,” Friend says of the new income tax. “It takes our collective investment to make our city great.”
The city is also known for its income inequality and sky-high costs of living – a place where the median household income is above $80,000 but tent cities for the homeless fill public spaces. In 2014, Seattle’s wealthiest households made 19 times more than its poorest. “While Seattle’s prosperity is remarkable … the city’s rising tide didn’t lift all boats,” Gene Balk wrote for The Seattle Times that year. “You might say it only lifted the yachts.”
‘This isn't just about ... revenue’
The new income tax serves as a vehicle for city leaders’ attempt to level the playing field between rich and poor. The tax would help fund affordable housing, education, and public transit, and restore any federal funds lost through anticipated budget cuts, they say. It also begins the dismantling of what pro-poor advocates see as an outdated tax structure that places the greatest share of the tax burden on the city’s lowest-income households.
“This isn’t just about raising revenue,” says Lisa Herbold, who represents Seattle’s District 1 and chairs the council’s committee on civil rights, utilities, economic development, and the arts. “This is about addressing a structural unfairness in our system.”
Perhaps as much as anything, what’s driving cities to act is the notion that big issues aren't being addressed at higher levels, given a widening ideological gap between progressive metros and conservative states and the federal government. Since about 2014, laws intended to address systemic inequality – both economic and social – have seen a wave of municipal support that’s faced either grudging acceptance or outright resistance from Republican governors and state Legislatures. To date, 40 localities have adopted minimum wages higher than their states’. More than 30 cities and hundreds of counties have passed “sanctuary” laws that protect undocumented immigrants from arrest and detention. And more than 200 cities and counties have ordinances that bar employment discrimination on the basis of gender identity.
“Cities feel a rush of urgency,” says Brad Lander, a New York City councilman and member of Local Progress, a coalition of progressive local officials from across the country. “There’s a difference between it being possible to do things at the local level and when the only possible place to make meaningful progress is at the local level.”
Risks in localized experiments
There are pros and cons to this struggle to strike a new balance among various levels of government. Experimenting at the local level may be relatively low-risk, notes Ms. Furchtgott-Roth at the Manhattan Institute, but “if it’s easy to do something, it’s easy to do bad policy.” There’s also the danger that a patchwork of policies could result in even worse inequality, not within cities but among them. Seattle and San Francisco may have the resources to weather a failed policy or two, but less affluent cities like Cleveland or Detroit probably won’t. “We want to lift up all places, not abandon some,” Greene says.
Still, he says, “Cities working more creatively with what’s in their toolbox to address local concerns around rising inequality is really exciting. The future – what this new landscape looks like – is a lot of open questions.”
In Seattle, Ms. Herbold openly calls the new income tax a method of “Trump-proofing” the city. In the event that the president makes good on his promise to pull funding from social safety-net and climate programs, she says, “we want to make sure that we have another revenue source that we can turn to.”
Already the state GOP has called the tax unconstitutional and encouraged Seattleites to refuse to pay. Members of the local anti-tax movement are concerned that the policy could set an unwelcome and economy-harming precedent. “Once it starts, it’s going to metastasize,” warns Tim Eyman, a conservative political activist. “It’s a Pandora’s box.” The Freedom Foundation, a local conservative think tank, has said it’s prepared to challenge the measure in court.
Backers say they designed the policy with legal challenges in mind. “We were going to make sure that the legal viability was going to be our North Star,” Herbold says. “If we’re able to use Seattle as a test-case for what can be done, maybe that can help address some of the fears and help create a larger movement.”