Seattle is scrambling to come up with a renewal for the Seattle Transportation Benefit District (STBD) which is set to expire at year’s end. Thanks to Initiative 976’s narrow victory statewide, funding options are limited. With the vehicle license fee (aka car tabs) that had been the STBD’s mainstay in jeopardy pending the Washington Supreme Court’s decision, the sales tax is the primary option remaining. The question is how big the City goes.

Mayor Jenny Durkan had proposed only renewing the existing 0.1% sales tax rather than raising new revenue to make up for lost car tab revenue. That means a shrinking of STBD bus service hours from 300,000 to 75,000 annually–a staggering 75% cut that would have turned much of the city’s 10-minute frequent transit network into a 15-minute network. It would mean longer waits for the bus, less ridership, and less progress on climate goals.

With King County shelving its countywide transportation benefit district idea in March and the Mayor waiting until July 7th to finally release her Seattle-only proposal, the Seattle City Council didn’t have much time to finetune the STBD. Since focus on JumpStart payroll tax and reining in overpaid and unaccountable police, it appears everyone was caught flatfooted. Sierra Club and a few other groups came out in favor of increasing the size of the proposal, but the city council was slow to respond. Finally, Councilmember Tammy Morales stepped in to offer an amendment that would add another 100,000 bus service hours by increasing the sales tax from 0.1% to 0.2%.

Some prefer transit cuts to sales tax hike

That idea had long been on the table and offered up as an option by staff, but some councilmembers were reticent in light of the pandemic and the recession. Councilmember Lisa Herbold professed being downright scared of the political implications of increasing the sales tax during a recession–apparently a huge cut to transit service seemed less scary.

“There are a lot of people who don’t use Metro, and those folks vote, and I’m really concerned if we end up doubling the size of the sales tax on this measure, we could end up regretting it,” Councilmember Lisa Herbold said.

Transportation Chair Alex Pedersen agreed with Herbold’s analysis and shared her fear that it would jeopardize passage of the measure. Councilmember Debora Juarez, meanwhile, objected to the last-minute nature of Morales’ amendment and said she hadn’t had time to weigh it or gather stakeholder input yet. Most councilmembers agreed that more time to digest the increase would be good.

As Councilmembers Herbold, Andrew Lewis, and Pedersen expressed their opposition and Debora Juarez, Teresa Mosqueda, Kshama Sawant, and Dan Strauss said they were planning to abstain, Morales withdrew her amendment. City Council President M. Lorena González was absent but may end up casting a decisive vote when the full council takes up STBD proposal on July 27th and Councilmember Morales reintroduces her amendment.

Another amendment shortening the STBD from six years to four years narrowly passed 5-3, but Councilmember Strauss said he’d like to switch his vote from yes to no, which would make it a tie, and González the likely tiebreaker. The justification for shortening the length was a desire to switch away from the sales tax to a more progressive funding source sooner rather than later. Some have also hoped that as a presidential election year 2024 would be a more favorable year for a countywide renewal. Pedersen countered that renewing in 2024 would risk a fiscal cliff situation and lessen leverage with Metro over service decisions.

Since the Move Seattle Levy is also expiring in 2024, it could either make it harder to pass both or open the possibility to combine them into one super measure. Or perhaps the Move Seattle property tax levy would remain separate and a King County measure funding both bus service and a light rail expansion could be created as Seattle Subway has begun advancing.

The success of recent transit measures in Seattle

The case that a 0.1% sales tax would pass but a 0.2% would not seems rather flimsy. If the long-rumored but rarely seen Seattle tax revolt is upon us, it’s likely going to buck either proposal. But it seems far more likely that either option option will pass easily given that Seattle overwhelmingly passed the last STBD measure in 2014, the Move Seattle levy in 2015, and Sound Transit 3 in 2016–and resoundingly rejected I-976 in 2019.

Some councilmembers have sought to defend the small size of the initial STBD proposal by saying it’s likely Seattle will be able to impose car tab fees again soon–and hinting they would vote to do so. It’s true the Washington Supreme Court may strike down I-976 for good and on the short horizon, opening up that option to the Seattle City Council. However, it wouldn’t be prudent to count on that outcome, and the city council is limited in how quickly they can ramp up car fees. Plus, while Sound Transit has a progressive Motor Vehicle Excise Tax authority that hits owners of expensive cars much harder, Seattle only has a flat vehicle license fee authority that is minimally more progressive than the sales tax.

Why the STBD sales tax is progressive

Councilmember Sawant railed against sales taxes in her comments, calling them regressive. That’s only half the story though. While the incidence of sales tax falls hardest on low-income folks, a sales tax can still create a very progressive outcome and reduce inequality if it’s spent in a progressive fashion. “Many policy analysts and advocates who want a more equal society overrate the importance of progressivity relative to sheer bigness of redistribution,” economist David Sligar wrote.

Investing in public transit fits the bill in multiple ways. Transit helps people lower their transportation costs by avoiding more costly car or ridehailing trips and speeding up the transit trips they do take while creating high-quality union jobs in the process. Furthermore, the STBD funds the ORCA Opportunity program which provides free fares for Seattle students and low-income residents.

We need only look at countries that have been highly effective at flattening wealth inequality to see our hyperfocus on tax incidence rather than the quantity of taxation and spending is misguided, as Sligar demonstrated in his analysis: “Social democratic leaders such as Denmark, Sweden and Norway have close to the least progressive taxation in the OECD. With universalist welfare systems, their spending isn’t particularly targeted at the poor either. What matters, however, is that they do a lot of it.”

Let’s think big!

Seattle has an incredible amount of wealth. We should not be struggling to maintain our transit system. Raising taxes will solve our immediate transit problem and will also contribute to the overall progressive aim of reducing wealth inequality via redistributive taxes. Rather than agonizing over the side effects of small taxes, we need to think big and tax big. Doing so will distribute wealth more equitably and it will allow us to solve our affordable housing and climate crises via a massive deep green building spree.

The recently-passed JumpStart Seattle payroll tax was a great start, but it’s just the start. There are still too many priorities that go unfunded and fortunes that go untaxed. Letting transit take a huge cut because we’re scared of a sales tax is wrong on multiple levels. It’d take us farther away from meeting our immediate transportation needs and climate goals, but it would also concede the larger intellectual battle about decreasing wealth inequality that we need to win–at least if we hope to get out of our death spiral of hyper-inequality, racism, and ecological destruction.

Contact your Seattle City Councilmembers to let them know you support Councilmember’s Tammy Morales’ amendment doubling the size of the STBD. Let’s save transit from the chopping block.

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Doug Trumm is The Urbanist's Executive Director. An Urbanist writer since 2015, he dreams of pedestrianizing streets, blanketing the city in bus lanes, and unleashing a mass timber building spree to end the affordable housing shortage and avert our coming climate catastrophe. He graduated from the Evans School of Public Policy and Governance at the University of Washington. He lives in East Fremont and loves to explore the city on his bike.

19 COMMENTS

  1. It’s true that large flat taxes and flat distributions can work out in a progressive way, but the key is maximizing the amount of money taken from the rich. The rich will fight that no matter how it is framed and there’s no clever technical ways to get around that problem, so we might as well fight to only tax them and not ourselves.

    Additionally, the rich can easily take a large flat tax because they typically have wealth to fall back on, but the poor could not unless the welfare infrastructure is fully operational when the taxes begin. This further motivates the need for progressive taxation.

    • I agree about focusing taxes on the rich as a long-term goal and solution to gaping wealth inequality. But how do we solve our transit funding issue for next year? How we keep the essential infrastructure of transit in place for people who rely on it? 54% of very low income people (<$35K) rely on transit for most of their transportation needs.

    • (Most off topic) Trump tax planning strategies for the rich and famous:

      Step 1: (Allegedly) commit tax fraud with your parent to avoid transfer taxes coming out of your inheritance.
      Step 2: Lose $916 million+ of said inheritance in terrible investments and mismanagement, have your accountant report the negative income as an NOL accordingly.
      Step 3: Run for president and tell the nation “that makes me smart.”

  2. I’m glad some council members have the balls to vote no – I don’t get the abstainers – they are a cop out. We hired council members to make the hard decisions and they aren’t willing to do it so they just let somebody else have their vote by abstaining!

    • The abstentions were on a vote on an amendment, not the main bill, and the reason was the short notice the Council had on the question. It was a procedural move, to take more time to consider the whole issue.

  3. Is there a reason the city isn’t going for a property tax? That would target wealth inequality more directly, I would think.

    • I agree. Unfortunately, I believe there are legal reasons why property tax cannot be used (I don’t remember the details).

      I also agree with the author of this post that the impact on people of going with 0.2% vs 0.1% is being greatly exaggerated. We’re talking about an extra $1 per $1,000 spent on taxable goods and services, with neither rent nor grocery store food being taxed. In practice, people will vote yes or no based on whether or not they support transit in general, and whether the tax rate is 0.2% or 0.1% is not likely to affect their vote.

      And it is also important not to lose sight of the big picture – even with the 0.2%, total transit taxes will still amount to far less than the cost of car ownership for anyone who isn’t extremely rich.

      I personally believe that many of the people arguing the need to hold off transit improvements until a more progressive funding source is available are actually making straw-man arguments; what’s really going on is that they simply oppose better transit, but the argument about the need for progressive taxation is a more politically correct way to say it.

      • Isn’t the current sales tax 10% in Seattle? Maybe I am confused, but I am getting from the article that they will make it 20%, which is more like $200 on $1000. Additionally, in pandemic environment who in their right mind will want to ride transit? The cost of cars is high because we are to pay all this additional costs such a car tab fees, insurance premiums and sales taxes. New cars require very little maintenance.

        • You’re reading it wrong. What the proposal would actually is increase the sales tax rate in Seattle from 10.1% to 10.2%. Nobody is suggesting raising it to 20%.

          Also, most of today’s 10.1% sales tax isn’t even transit. King Country Metro is 0.9%, Sound Transit is 0.9%, and the Seattle TBD is 0.1%, bringing the transit total to 1.9%, which the proposal would increase to 2%.

          The remaining 8.2% sales tax is for other governmental purposes unrelated to transit. I think it’s divided up between the state, county, and city.

          “Additionally, in pandemic environment who in their right mind will want to ride transit?” Some people don’t have the choice, and depend on it to get to work. But, aside from that, we have to think about what happens to transit after the pandemic subsides (perhaps, when a vaccine becomes available) and life returns to normal again. If we cut funding now, there won’t be enough buses and drivers to handle the loads, forcing everybody into individual cars on gridlocked streets. While it can be increased later, putting a measure to voters takes time and, even if it passes, hiring bus drivers takes more time. The last Seattle TBD, it took a good 5 years to procure all the buses and drivers necessary to reach the 2020 level of service.

          So, under your strategy, the timetable looks something like this. Major service cuts in late 2020, vaccine available in summer 2021, service cuts continue. November 2022, we pass the extra 0.1% to ramp service back up. And, in 2026, Seattle transit service finally reaches the level it was back in January 2020. Sorry, but 2026 is along way away, and I don’t want to wait that long.

          “The cost of cars is high because we are to pay all this additional costs such a car tab fees, insurance premiums and sales taxes. New cars require very little maintenance.”

          Actually, car tabs and sales taxes contribute relatively little to the cost of cars. For newer cars, the cost is mostly depreciation, with gas+insurance adding a non-trivial additional amount. Older cars, you pay less in depreciation, but more in repairs. And, of course, if you live in the middle of the city, you’ve got to tack on parking. The total cost of car ownership is typically estimated at $500-800/mo. (depending on the type of car, how much you drive it, and what repairs end up being needed), which is far, far more than a normal person typically pays in sales taxes.

          • The cost of cars is paid by the individual – and that individual pays taxes on almost everything purchased with the car. It’s the individuals choice whether to pay for it or ride transit. Transit bus capacity has been very low and will continue low until a vaccine is produced and able to be given to every citizen. Just getting everyone vaccinated will take months and getting a viable vaccine also more months so we are at least one year away from normal or more. We don’t need so many dollars for transit until then.

          • I think property tax levies require 60% voter approval to exceed the 1% lid, so are a bit more risky than sales tax measures.

          • Skylar is correct. Under the state constitution (Article 7, Section 2, Subsection a), at least 60% of voters would need to give approval. But yes, a TBD could levy a property tax if it were proposed and that threshold were met.

            Talker2 is wrong. Individuals do not cover the full cost of cars. There’s still ample subsidies that go along with car ownership and operation paid by the public…just like transit. Try again.

    • Property taxes are by far one of the more regressive taxes. Its getting to the point I want to move because I cant afford to keep funding a corrupt city. Metro and ST3 both for years have been among the worst managed entities. My taxes in 10 years have tripled. Dont even get me going on excise taxes. They should just have a head tax for every person in the city equally instead of stealing from us who own homes.

      • What’s your definition of regressive? I would define a regressive tax as a tax that targets poor people, and a progressive tax as a tax that targets rich people. A poor person is someone of low income and low wealth. A rich person is someone of high income or high wealth. So, if someone has a low income and a $1mil+ net worth, they’re a low-income rich person, and thus surely its progressive to soak them with taxes.

        Perhaps this is slightly off-topic, but it’s a bit of a pet peeve of mine when I hear people use the word “low income” interchangeably with “poor”. I’m not sure how it all started, if someone thought the word “poor” didn’t sound very nice or something. But gosh, I think a lot of people get really confused about tax policy just because the terms are so often conflated.

        Remember in the lead up to the 2016 election, when some people were so angry and outraged that Trump paid nothing in income tax even though he’s so rich? Of course he paid nothing in income taxes, he’s a low-income rich person. His income in many years wasn’t just zero, it was negative. According to the NYT’s reporting, in some years he may have been the lowest-income person in the country. In 1990-1991 his income was negative $250 million. Think about that for a second; compared to some struggling person with no net worth making $20,000 a year, his income was $250,020,000 less than theirs. Are you really going to argue that he’s poor just because he’s low income? If not, then why is the situation of a low-income millionaire in Seattle any different?

      • Most property taxes (including ours) are flat. They are neither progressive nor regressive. That is off topic anyway, since this is for a sales tax.

        • i’d argue property taxes are relatively progressive because I don’t think landlords increase their rents more than they would have anyway due to a property tax hike. They may *say* they’re increasing rents to meet the hike, but they probably would have found another excuse soon enough. As such, renters are little effected by property tax increases while homeowners have the ability to defer the tax entirely if they’re low-income. No such luck for the sales tax.

          • I 100% agree. To make matters worse, I’m pretty sure that when a public investment that increases property values is funded by a sales tax, renters pay twice. Once directly, through the sales tax. And then a second time in higher rent, when the landlord looks around and thinks “man, with all these nice public amenities here now, this apartment is definitely worth more than the $900/mo I was charging before.”

            To be clear, I think if this sales tax for the TBD is the best we’ve got, then it’s the best we’ve got and we should fund transit with it. But I would love to see the City of Seattle push for a land value tax with a similar fervor as it did for an income tax. It’d be more progressive than sales tax, for all the reasons hashed out above. It’d presumably be about as efficient to administer as property tax, and more so than an income tax. (How well could a cheat hide the tax base? All the revenue collection agency needs to do is look at a map.) It would be eco-friendly because it would promote more efficient uses of high-value locations. And if the value taxed is limited purely to the location a real estate parcel is in, then the tax wouldn’t increase in value due to someone’s hard work; instead the tax hikes would be based purely on someone’s good luck of happening to own property near where Bezos decided to start his empire, which to me sounds more politically feasible.

            That being said, it would be good to have an across the board rule that prevents landlords from structuring contracts in a way that means property tax hikes automatically get passed on to the tenant in higher rent, regardless of whether its a residence or a commercial property for a small business. (A commercial lease of mine is structured that way and it’s pretty unpleasant.)

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