In Seattle “progressive” has simply meant higher property taxes. Affordable housing problems? HALA proposes to double the affordable housing premier estate properties tax levy, plus add in more density like bumping zoning from 4 stories to 6 stories along 45th. Fixing infrastructure for new density? Property taxes and utility rates have been going up to pay for things like new schools and sewer overflow controls. Bad traffic? Move Seattle nearly doubles the Bridging the Gap levy to pay for more road work and transit on top of existing levies for buses and rail (that are also planned to go up). Closing the achievement gap? The families and education levy doubled in size last time, and Seattle School building levies have been going up as well. All those taxes making housing affordability worse still? Maybe we need more HALA-type taxes and density. It’s a vicious cycle.
The average household in Seattle is paying over $4,000 per year in property taxes (or $2000 per resident, since the average household size is about 2). The expense is hidden for a lot of people in their rent. The result is that the lower middle class are the ones getting hurt worst by our current setup, as that group is paying the largest chunk of their income towards rent or property taxes and does not qualify for government housing subsidies.
Income taxes are progressive because they don’t hit people until they reach a certain income level. Whenever you ask Seattle politicians about the issue of regressive taxation they throw up their hands and say an income tax sure would be swell, but the state says no. Statewide politics are very unlikely to change soon given that recent statewide votes have gone 2 to 1 against income taxes (even though they passed in Seattle).
While Seattle can’t have an income tax, it can have a progressive property tax. A progressive property tax is just a levy that funds property tax deductions, like we have for income taxes. For instance, we could create a standard deduction of $2400 per year per resident, with renters getting a $200 check every month (to make the benefit clear and prevent landlords from pocketing the benefit). A change like that would require doubling the overall property tax rate, but the only people that would pay more on balance would be those who are in high value, low occupancy homes. The landlord insurance must be taken by everyone to reduce their losses.
People consuming less than the average home value would see overall rents or taxes drop, people consuming above the average home value would see their overall rents or taxes rise. The levy would incentivize denser living (more people = more deductions), cut rates for people in lower value homes, and shift the tax burden to singles or couples in high value homes.
The change could include tweaks to help people that are really hurt by the switch. For instance, low income seniors already get a cut on their property taxes, so that program could be expanded. The central idea is to collect tax dollars from those that are best equipped to pay. Also, to keep things simple and focused on the problem area of residential housing, property taxes on businesses would be unaffected.
A good way to roll out a progressive property tax would be as part of the next affordable housing levy, which is proposed to double by the HALA task force. Instead of simply increasing taxes to pay for government programs, they could look to bundle in a progressive taxation system.
Since deductions would be based on residents per property, people would have an incentive to report their place of residence. In fact, there could be an incentive to abuse the system, so just like the IRS checks up on tax fraud, a department at the city would need to verify residency by cross checking with the IRS, driver licenses, school registration, and other means.
On the up side, once the city had that information, it would also be able to have progressive, consumption based taxes on utilities. Right now, the city doesn’t know how many people live at each residence, so it can’t penalize the higher water, gas, or electricity consumers. Once the city knows how many people live at each residence, it can set those utilities up so that the highest per-capita users pay a premium, benefiting efficient users of utilities and encouraging conservation.
So that’s the pitch, what do you think? Let me know in comments if I screwed up the idea or the pitch. If enough people agree, I’ll take the issue to the candidates and see what they think.
Loading ...
Please stop thinking up ways to spend my money.
Dave- it’s kind of the opposite of “ways to spend money”. This is about who to collect the money from, not how to spend it.
This is the dumbest Idea ever, and like our tax code, I can see the loopholes, exclusions etc.
For Example: Is grandma is going to get pushed out of her house even faster due to being single, and living in the same house she raised her family in? (huge tax bill!)
Big house, one person = super high tax?
Or, will grandma get a senior’s exemption? Will she still get the exemption if she’s worth millions? Will we then treat some wealthy grandma living alone differently than the poor grandma next door living alone? Both are single residents in a big house.
Overall, why are so many people like Erik focused on treating people differently, when that is in itself inherently blatant discrimination?
Although you covered it in your article, I am still compelled to say again that we need a Washington state income tax. That is also progressive, and would take care of some of the other expenses and costs that are now paid by us (and David Powers (: )
I do think the idea you mentioned is worth proposing and considering, and forwarding to the candidates.
It was hard to respond definitely to any of the choices, because I see a huge problem with having an accurate way of documenting how many people, (and who they are) live in a house.
We care close enough to UW, that there are house with 3-6 people in it, but the names are constantly changing. However, the reporting might be better than I anticipate, because it means they would pay less per household, which, as you stated, is an incentive to report.
We are one of seven states without an income tax. If we had it, it would be more economical in the long run to plan, and the sales tax could conceivably be reduced. The sales tax and the property taxes are regressive, in many ways.
An example of treating people differently, is having a millionaire paying the same % sales tax on someone or a family earning 40K/year.
iowagirl just made my point.
Sometimes “progressive” = “discrimination” which is not at all the intent, and cheapens the whole point of a progressive society. Slippery slope. Take the AMT Tax issue. That wasn’t meant to hit middle income families but now (due to inflation and rising salaries over decades, it does unless congress fixes it each and every year.
I’m not a millionaire, but don’t think they should pay more just because they have more. Equal = Equal, period. When you get away from that, you end up with an “Animal Farm” Scenario.
If we treated everyone equally, and didn’t have the tax code that favored anyone more than others, then we’re back to the spirit of our founders.
I haven’t read the entire HALA report yet, but I’m pretty sure it’s proposing to double the amount of the housing levy, not “double your property taxes”, as Eric says in the first paragraph. Our property taxes go for a lot of other things than the Seattle housing levy. I will most likely vote to increase the housing levy, because I do want to increase affordable housing. I am more than happy to have accessory dwelling units, mother-in-laws and townhouses on my block and elsewhere in the neighborhood. (Not happy about the idea of tear-downs of “affordable” housing to replace it with three non-affordable units.)
Given that, I am opposed to the “progressive” property tax. I bought my Wallyhood house over 40 years ago, for less than I paid for my 1995 Honda. There is no way I could afford to buy into this neighborhood now. My property taxes are over $7,000/year. I’m not poor but am on a fixed income, and even that amount is a bit of a stretch. I don’t want to be taxed for the fact that I live alone.
Janey- HALA proposes to double the housing levy portion of your property taxes, not the overall rate of property taxes. I can see how the wording in the article was unclear, I fixed that.
@iowagirl, I totally agree with you about the need for a state income tax. It’s the most progressive tax we could implement!
Might not need to document how many people live in a house? This system would tax the house, but individual people each get a deduction, if I understand it right – so the 6 residents of that house might end up more than breaking even, I don’t know if that’s really the intention. Or a family with 6 kids, would that count the same? Lots of details, but you can consider the general principle of it if you want, and assume the details can be worked out.
Janey has a valid point, written above. There are people who live on my block who have lived here over 40 years. I think the longest one purchased their home for 25K. Now, with the appreciation, property taxes are in the 5K-7K range. They have worked all their lives, but now retired. I forgot to include the data on the states without income tax. here they are?
41 states have a broad-based individual income tax. Only seven states lack an income tax altogether. They are:
Alaska
Florida
Nevada
South Dakota
Texas
Washington
Wyoming
Two states have a limited income tax on individuals. These states tax only dividend and interest income: Tennesee and New Hampshire
NO INCOME TAX! Do any of you honestly think this will work here at all? Really? Our politicians have shown time and again they can’t be trusted with our money, spending it even when we vote a resounding “NO!” (Safeco Field and the Mariners sitch comes to mind…). So you all want to give them another opportunity for financial bloodletting? Ha! We have high sales taxes and high property taxes and high lots of other stuff, but no income tax. Oregon has high property taxes and a state income tax but no sales tax. California has all three (although some people got a little relief from Prop 13). Which of these three states is doing so much better than the others? Proof that once politicians have an income stream, they will drain it with all due haste. Some years ago I was working in Vermont. Howard Dean was the governor whom we actually got to meet when he did a cameo in our film. Seemed like a cool dude. When I asked some of the locals about him, they said that initially, they weren’t sure what kind of governor he would make (he replaced the sitting governor who had died while in office). Then he enacted a temporary increase in their sales tax (by 2%, I believe) for a term of two years to finance some highway construction/maintenance. People were mighty unhappy about that, but, hey presto, the work was done more quickly and for less than originally estimated, and true to his word, he repealed the temporary tax immediately. He was subsequently reelected 5 more times. Now, here in Seattle/King County/Washington State, whenever there has been a “temporary” tax enacted, the minute it is due to sunset, there always seems to be some politico pushing to retain it since people are already used to paying it. Making promises to lower sales tax and property tax rates if we enact an income tax is total b.s. There would be a honeymoon period and then, whammo!, the rates would start rising again for some project we absolutely can’t live without (another stadium, something for “the children”, more parks we can’t afford to maintain, etc….?). I and the bulk of my Seattle friends (Democrate, Republican, Populist alike) will always vote “no” on this issue.
iowagirl and Janey,
Please do not cheapen the meaning and spirit of “Progressive” which is routed in equality, by using the term “progressive income tax” which is in itself unequal and discriminatory.
I think part of the problem here is that you call it progressive and compare it to income tax, but it isn’t clear how that actually applies to the proposal – you have a flat deduction, not progressive. So if there’s any relief for someone paying $7K on a fixed income, it’s somewhere else.
It may seem unfair for someone of modest means to have a home in Wallingford just because he or she bought it 30 years ago, but when we moved to Wallingford, each of us made choices that we could afford. If we’re to be exiled now … whose city is this?
Donn- the income tax has flat deductions as well, but the fact that it has deductions at all is what makes it progressive.
This tax would be progressive in the sense that people occupying more home value would pay more, instead of people who make more money. It’s a progressive occupancy tax, instead of a progressive income tax. Like the article suggests, low income folks could benefit from a property tax reduction program like already exists for low income seniors.
To be more progressive with regards to income, property tax deductions could involve Seattle collecting everyone’s income taxes and then refunding money based on tax brackets, but that gets really messy as a solution. The city currently has no access to your income tax information, so I don’t know that it could even work. A standard deduction keeps things simple and focused on the HALA goal of housing affordability at the low end. Maybe too simple?
Also, thanks for your thoughtful responses Donn, they really help move along my thinking with regard to all of this. If you (or anyone else) has a crackpot idea you want to get out there and see how people vote on it, please feel free to reach out to the blog. I like the blog to potentially be a place where ideas are born and vetted, not just to be a site that repeats information.
Florida, no income tax, and an interesting property tax structure
(designed with previous comments of older folks living in expensive homes now, but not when they bought it.
The basic real estate tax basis-
2% of purchase price. +/- adjustments annually,
with for year rounders 3% cap, and a homestead excemption.
this will reflect directly a family who purchased a modest house on the beach for 40k back when, and now has mac-mansions as neighbors valued (and assessed) in the millions.
this allows for grandmom/pop not to be priced out by taxes.
It seems to work well ( not if you consider the state’s third from the bottom educational achievement )
Florida, like Seattle taxes the c+ap out of visitors.
The” last one in” should be paying a higher share of the bills
RUCRAYZE- That’s cool for long time residents, thanks for sharing. I also like policies that limit increases to appraised value year to year- not sure if that exists in King County.
It doesn’t help with renters though, who are now the majority of Seattle’s population. It also doesn’t help with the HALA goal of increasing available lower income housing.
Intriguing idea. I’m all for a progressive property tax system, although I suspect this idea needs refinement. And I would prefer an income tax, for sure! More importantly, I am disheartened by anti-tax crowd represented in comments. We all want better public services, greater access to shops and stores, clear air and a safe neighborhood, but not enough to pay a bit more in taxes because we “pay enough.” Nope, collectively, we don’t pay enough for the list of all that we want. Unfortunately, our regressive tax system means some of us pay more than our fair share and others pay less than our fair share.
“our regressive tax system means some of us pay more than our fair share and others pay less than our fair share.”
Mary, did you mean to imply that some people SHOULD pay MORE than their fair share? How is that “fair” or “progressive”?
How about we all pay the SAME fair share? Now that’s called equality!
That way there are no free riders or free loaders on either side of the income scale.
Enough new property tax levies. Home owners can’t continue to fund all of the “feel good” issues.
If there’s any real sense in a property tax, it’s as an instrument to optimize land use. I don’t think it’s often very successful at that, and maybe we just have to accept that there isn’t much real sense in our main forms of taxation, but … that land use optimization does seem to be implicit in the premise here. Here we are, two of us on a 30 foot lot, consuming housing value at a certain rate, and our tax burden would decrease if we were to consume more efficiently. Whether the deduction would really make any difference eludes me – if each of the two of us are paying X/2 or (X + 2*2400)/2 – 2400, it looks like it might come out the same!
But the underlying premise is that we ought to move if our house’s market value is beyond our means, and the tax will keep nudging us in the direction. That doesn’t really serve anyone’s purposes, unless you like to see new lot-line-to-lot-line mansions going up.
Or we ought to rent out part of our 30 foot space to more people. That’s a great idea, for a few houses to go that way here and there, but applied too universally to the SF zone housing stock is not right. I think there’s broad acceptance that Single Family doesn’t have to mean a rigid restriction, but at least loosely speaking, it does mean what it says.
As a now retired 30 year owner of a condo in Fremont I’ve seen my property tax more than triple with a 30% increase just last year. I’m retired on a fixed income & annually pay over $3,600 in real estate tax & can’t afford more.. All I ask is that they fix the potholes that have destroyed one new tire on my old car. I was born in Seattle & lived here 65 years & have never seen it’s major infrastructure in such poor shape! Get rid of the spendthrift worthless communists like Kshama Sawant that are destroying Seattle.
angry is o.k., pis+ed off, but I think unnesessory for a “neighborhood” forum to direct accusations to neighbors.
As an outsider, I clearly see a total reaction to the tech bubble.
If the “planning” of the city, should continue to cater to the big tech industry,i.e ruining low impact neighborhoods to build hi-rise compact housing it will so seem to be short sighted, when the businesses will have to move on/out. (India? China?)
.
Sounds like retirees should plan to live elsewhere, unless they are really, really rich. My biggest concern is where they are spending all this “free” tax money. Neighborhoods outside of central core are losing out big time. Maybe should consider taxing downtown, SLU, and all the other areas getting the goodies more and those neighborhood without sidewalks, poor transit options, bad roads, etc. less. Do developers pay too under this progressive scheme?
How do we know paying more will go to the things neighborhood needs like school, public safety, better transit, and not for more pocket parks, beautifying the new waterfront, and more 1 mile trolley. How do we know they aren’t going to waste all the $$$$? The Ferry system is a mess, Sound Transit, the Port, the tunnel, metro, mercer….. Public works project in this town and state is amazingly inefficient, opaque, and byzantine. We are slowly morphing into a W. Coast New Jersey.
No, we don’t want retirees to live elsewhere. I thought this was an all-inclusive community. Come on
I encourage anyone interested in progressive taxation in Washington to read this:
http://www.eoionline.org/blog/states-sales-tax-grinds-us-down-but-it-doesnt-have-to-be-that-way/
And then come to this fundraising event (with Rick Steves!)
http://bit.ly/catalyze2015
A progressive state income tax is possible. We are developing a plan and would love your support.
This is really re: the first graphic, and in particular the lower right quadrant.
Can anyone explain to me how you think that lower density will result in cheaper utilities/roads/etc? The growth isn’t going to stop. Period. We can develop with low densities and spread out. More people have to drive, increasing traffic. Utility lines have to cover longer distances. More schools have to be built.
On the flip side, we can develop with higher densities. Trips are shorter, and more can be done with walking, biking and transit. Utilities have to be upgraded, but don’t need to spread out. More schools have to be built.
I’m not even going to touch how little property taxes have to do with increasing housing costs. Might be true for folks who are lucky enough have paid off mortgages, but that’s got to be a tiny percentage.
Kyle, when my renovation is complete, I will be paying $7000/year for taxes on my Triplex according to the city valuation.
I live in the bottom 1/2, the tenants in the top two units. I pass along ALL the pro-rated share of taxes in the monthly rent. That means that my current tax bill of $5000 will go up by $2000, thus the rental units share will increase by their pro-rated share of $500/each/year. That means I’ll up the rent by $41/month ONLY due to the increased property tax.
Each time property taxes increase due to new a new levy, bond, etc., my tenants rent increases to COVER that cost. I’m not making ANY more each month, it’s a pure expense I pass on to them.
When you say “I’m not even going to touch how little property taxes have to do with increasing housing costs.” it shows a general lack of knowledge about how the rental market operates.
Sure, $40/month isn’t nothing, but you’re talking about an increase due to your capital improvements. And unless your rent is a much better deal than the last I paid, it’s much smaller than the rent increases I’ve heard about in the 5-10% range.
The housing levy right now is $0.18/thousand, so on a $1M property that’s $180 a year. Double that and split up as you suggest that comes to about $4/month.
Kyle, so I improve my property using my hard earned dollars at my risk, my taxes then go up, and I’M the bad guy for increasing rents in Seattle?
Sure $4 here and there doesn’t seem that much when looked at as each individual levy or bond measure, but add them ALL TOGETHER and you can see the impact they actually DO have on rental rates.
The drip, drip, drip torture of each small property tax increase is now actually hitting home to renters and homeowners alike.
What you see there in the lower left quadrant of that diagram is not the theoretical goodies that the density fairy might eventually deliver, but the observable result of what increased density has been delivering. As Seattle gets more crowded, we don’t get enough more schools to keep up, we don’t get enough more transit to keep up, etc. We need to spend a lot more money to get those things – hence the lower left quadrant. Current levels of taxation don’t raise enough money, partly because of I think the term is “marginal cost” that’s incurred by growth, but there really is some question about the economics of density as well – the numbers might tell you high density is more expensive once you get past 250 people per square mile (and that’s not very dense!)
It’s a complicated subject, and many of the “because density!” crowd know they’re oversimplifying it.
Just like they knew HALA’s SF zoning numbers were fraudulent – “approximately 65%” Seattle Displacement Coalition busted them on that, and an article in Crosscut goes into the numbers: apparently, they carefully exclude right-of-way (roads), which are relatively compact in residential areas, but INCLUDE PARKS as SF residential. Yeah. Be careful when you listen to these people.
The people who driven out by property taxes are retired people who did indeed pay off their mortgages a long time ago. Now their reward is be taxed as though they were affluent, so they can’t afford the house they payed for and have lived in for decades.
And with the standard of living going up with the $15.00hr increase, retirees on fixed incomes will see even a bigger decrease in their stanard of living.
Steve
Why should I pay for ‘affordable housing’ for others? If they want affordable, they can move to Detroit! They stay here, then they pay for it. Progressive taxation…bull! We don’t even have that with cars….I have a 1999 car with under 50,000 miles on it. When they up the registration fees to pay for pet projects, why do I pay the same amount as the guy with a 2015 BMW? If they aren’t even doing it with cars, how can I trust this city with housing?
Oh, btw I am single and live in a home, but it’s a home that’s under 800 square feet. So now I am penalized for being single?
I have had enough, I spend every evening looking for real estate in places other than Stupid Seattle. I have lived here 15 years and loved it dearly, now my dream has turned into a nightmare because of strangers that I am supposed to worry about whether THEY have housing? I have to worry about myself.
Maybe you are mistaken?
I am sure that you do not pay the same as a 2015 BMW. Fees vary with age,weight, etc of cars. My fee goes down every time I register it, cause it is older.
How are you penalized for being single?
@iowagirl, no I am not mistaken on the car fees, that’s why the last hike almost didn’t pass as it was considered regressive.
How am I penalized for being single? Did you read the article? They are counting how many people live in the house in their calculations, so yes am being penalized for being single.
Geesh
Well Eric, my taxes have tripled in the 15 years I have lived here as they have pretty much eveywhere in Seattle, and yet this Bonanza in revenue is somehow not enough. It never will be enough. This need to tax anyone who looks just a little too prosperous is petty. The lack of accountability in Seattle government is apalling, and the naivete of the voters is pathetic.
We used to have progressive car tabs before Tim Eyman decided it wasn’t fair to his new BMWs. Property taxes could be made more compassionate for seniors by setting taxes when a property changes hands based on the price paid and allowing only very limited increases until the next change in ownership. Taxes would ratchet up to current value when the property changes hands again. A benefit of tying property taxes to the most recent sales price is that it rewards longterm ownership and slows speculation.
Guest editorial in the Times last week proposed that capital gains tax could scale to ownership term, also to dampen speculation. Home ownership is the wealth of the middle class, and it’s good to see some gain from appreciation in adjusted values, but I think the kind of increases we’ve seen in the last three decades are more of a curse than a blessing to people who buy homes to live in. (Especially when they’re bubbles that collapse before you get out, but that’s another story.)
To get back to the proposal … it appears to me that it really helps only renters, and I think philosophically my objection is that it won’t do that either: when you subsidize everyone in a sellers’ market, buyers can afford that much more and inevitably pay exactly that much more. Same problem with income tax mortgage deduction – the money ends up going to speculators and finance institutions, not home owners, in a market like this where buyers fall over each other to pay more for a house.
You will likely face a legal challenge to any “progressive property tax”, as your deduction scheme could be interpreted as circumventing the state constitutional requirement that “All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax…. All real estate shall constitute one class” (Article VII, section 1). The word “uniform” here means “taxed at the same rate”.
The Seattle program for low income seniors and the disabled is based on entirely exempting these people from certain property taxes, not on deductions. Section 10 of Article VII authorizes such tax exemptions for “retired persons” if so legislated.
Thank you for an informed reply.