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Seattle’s Tarnished Dream

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Seattle’s Tarnished Dream

A generous safety net doesn’t mean much if you can’t find jobs or afford housing. July 21, 2020
Cities
Economy, finance, and budgets
The Social Order

In his 2017 State of the City address, then-mayor Ed Murray declared that “Seattle will shine a light and offer a different vision.” He promised a city where all four-year-olds attended preschool, where all high school graduates had access to free community college, and where strict labor standards guaranteed the lowliest worker a reasonable standard of living. Above all, Seattle would be committed to improving the lives of its people and to pursuing social justice.

Less than four years later, the dream of Seattle as a Scandinavian-style enclave, the steward of a robust safety net, remains unrealized. Like much of the country in the wake of the Covid-19 shutdowns, the Puget Sound region suffers double-digit unemployment. Seattle’s vaunted minimum wage is meaningless to those who can’t find work or who struggle for more than part-time hours. The city faces a significant budget shortfall, crumbling infrastructure, and bitter infighting among its nominally progressive elected officials. And of course, images of Seattle’s unpoliced and anarchic “autonomous zone” recently filled television screens and social media feeds nationwide. This can’t be the vision that city leaders, including Murray—who resigned amid a host of sexual-abuse allegations—had in mind for Seattle. What went wrong?

Lots. Social benefits for the poor aren’t worth much if the poor can’t afford housing in the city that offers them. A family looking to find a place to live in Seattle must navigate a market where the median two-bedroom apartment lists for more than $2,600 per month. Lower-income families have been priced out into the suburbs. Drive south from Seattle into neighboring Tukwila, and you’ll see the child-poverty rate nearly triple, from 10 percent to almost 30 percent.

Seattle’s more socialist-oriented leaders might describe the city’s housing-affordability crisis as reflecting the failure of capitalism, but the problem has more to do with government overregulation. Three quarters of residentially zoned land in the city is restricted to single-family development. Seattle’s leafy pseudo-suburban neighborhoods, dotted with yard signs signaling support for disadvantaged and marginalized groups, thus make it extremely hard for members of those groups to move in. No political will exists to change these zoning rules on a citywide basis.

A key lesson from the 1970s fiscal crisis in New York and other cities, articulated by political scientist Paul Peterson in his award-winning book City Limits, was that local governments should not engage in redistribution. If you take from the rich to give to the poor, the rich will move to the suburbs. Seattle has avoided tax-and-spend redistribution. Instead, the city has placed a series of mandates on employers: a high minimum wage (now $16.39 for large businesses), paid sick leave, secure scheduling, and so forth. Even in good times, these employer mandates don’t really soak the rich because the owners of low-wage-paying businesses often don’t take home much themselves. The most profitable businesses, in Seattle and elsewhere, aren’t the ones employing large numbers of workers. They are the ones, ironically, finding ways to use technology to make low-paid workers obsolete.

In bad times, third-party redistribution fails entirely. Seattle’s employer-funded safety net collapses in a recession. The minimum wage, paid leave, and advance scheduling do nothing for you if you have no job. And by raising employers’ costs of reopening, the government will likely extend the suffering during the downturn.

Like Texas and Florida, Washington has no state income tax. Like California, Washington imposes restrictions on property taxes levied by local government. While the Emerald City may aspire to emulate New York, where state and local governments spend over $9,000 per person every year, revenue limitations keep the Evergreen State to a more modest $5,342 per capita, just above the 50-state average.

Seattle has repeatedly chafed against the state’s revenue-raising limits. The city enacted a progressive income tax in 2017, only to have it ruled unconstitutional in state courts. State law permits the city to circumvent property-tax limits with voter approval. Voters approved levies to pay for transportation improvements in 2015, a municipal campaign-finance fund in 2015, affordable-housing programs in 2016, education programs in 2018, and to boost public library funding in 2019. Together, these levies place Seattle’s property-tax rate near double the statutory maximum. Each time voters approve a circumventing new tax, the associated spending programs receive a relatively recession-proof source of funds that can’t be diverted to other spending needs.

The functions of city government not directly supported by voter-approved levies, most notably the police and fire departments, compete for dollars from the city’s general fund, which relies on sales and business taxes. The 2020 budget projected $1.73 in revenue from these volatile, regressive sources for every $1 in support from property taxes. The liberal Institute for Taxation and Economic Policy rates Washington’s state and local tax regime as the nation’s most regressive; the Seattle-based Economic Opportunity Institute rates Seattle’s municipal tax regime as the state’s most regressive. Where Paul Peterson cautions against cities taking from the rich to give to the poor, Seattle takes from the poor to give to the poor.

Seattle’s jury-rigged tax system leaves the city poorly equipped to fund basic services during a recession. In successive ballot proposals, Seattle taxpayers have approved specific amenities and progressive touchstones. Fundraising for the fundamentals of local government has been left off the menu. The city has dedicated property-tax funding to pay for free preschool, but not to pay for police. It operates two streetcar lines, built for $185 million, that serve fewer than 5,000 riders a day between them. Its four-and-a-half block downtown bike lane cost $3.8 million. Meantime, the city-owned West Seattle bridge, which once carried 100,000 vehicles per day, sits damaged and closed, facing an estimated $60 million annual bill for deferred maintenance.

With voter-approved projects and initiatives insulated from the coronavirus-induced collapse in revenue, public safety and other basic services stand to take a severe hit unless the city gets a bailout or enacts new taxes. The city council has just passed a bill creating a new payroll tax for high-paid workers at large companies. If the new tax survives expected legal challenges, it may reveal whether companies like Amazon stationed tens of thousands of high-paid employees inside the city despite its regressive tax system, or because of it.

Mayor Murray hoped to teach the world that progressivism and prosperity can go together, that any city or state could adopt Seattle’s agenda without driving out jobs and the wealthy. He might have even argued that progressivism itself created the prosperity. But as Seattle struggles through the coronavirus recession, it’s clear that progressive policies are no guarantee of prosperity, and that it is the city’s Amazon-driven boom that has enabled it to pursue its agenda.

The portions of Seattle’s agenda funded by dedicated property-tax levies will remain intact through the recession. There will still be free preschool and community college for the dwindling number of lower-income families that can afford to live in the city. We’ll still have world-class public libraries, bike lanes, and shiny (if mostly empty) streetcars traveling on deteriorating roadways. But the city’s safety net will be cold comfort to the unemployed, who continue to face astronomical housing costs while bearing the brunt of cutbacks to essential services.

Photo: Elizabeth-Lara/iStock

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