The Seattle City Council gave final approval to repeal (only McIver against) the $25-per-employee-per-year “head tax” that funded $4.5m a year in transportation improvements, notably for bicyclists and pedestrians, and exempted employees who didn’t drive alone to work.
Although Council President Richard Conlin insists bike and ped projects won’t be harmed, there’s discontent among advocates for those projects, and understandably so. That said, there may be less here than meets the eye.
There are two nice things about the head tax: one, it provides money for important projects, and two, it collects revenue in a manner that discourages socially destructive commuting.
Councilmember Sally Clark has a characteristically frank assessment of the revenue side:
The loss of revenue from the Employee Head Tax does mean we’ll have to shift some spending priorities. We’ll pay back bond debt over a longer period and, ultimately, pay more. Because the Commercial Parking Tax now generates more revenue than expected, I don’t expect the total volume of street projects completed will be any less than what was promised when Council adopted these taxes, but we’ll take on fewer “extra” projects in the coming years because we’ll use the unexpected higher revenue from the parking tax to pay off debt instead of revenue from the EHT.
One hope for further revenue is Nick Licata’s proposal to direct the Mayor to study diverting $15m in annual mobile speed van revenue to the pedestrian fund. That passed in the budget today, and Mayor McGinn will have to report by March 1st.
The other issue is the deterrent to driving, and I don’t think that the head tax was all that effective for that. Assuming the $25 incentive was even worth the staff time for the business to claim, the tax was entirely transparent to the commuter, the one that decides which mode he or she was going to take to work that day.
Councilmembers can spin it up any way they wish, but the bottom line is still the same — we’ll get $4.5m+ fewer dollars spent on transportation improvement projects within the city. Period
I just don’t get it. Even Kirkland has a $100 head tax. Is 25 bucks (for SOME employees) really too much to ask?
Kirkland doesn’t charge B+O tax. I think Seattle is (was) one of the few cities (maybe the only) to charge both a Head Tax and City B+O
I think it’s a little presumptive to say that the head tax is discouraging “socially destructive commuting.” Do we really know that? I mean, are there any studies indicating that the head tax has actually reduced single car commutes? I certainly haven’t see anything like that.
I ask this because I’ve worked in downtown Seattle for 10+ years at a large firm and I have never recived any communication or encouragement from my firm that my driving to work was something that was frowned upon. Furthermore, if I had to estimate, I’ve filled out some sort of transportation survey maybe once or twice in the last 10+ years. In fact, I bet if you were to ask every employee at my firm what they think about the head tax that at least 50% would have no clue about it, and it’s probably closer to 75%. I seriously doubt that the head tax has done anything to discourage/encourage the commuting habits of our employees.
I know sometimes that when you are close to a situation it seems like it should be clear as day to everyone else but that’s not always the case. I think you overestimate the actual impact of the head tax along with the visibility of the tax by downtown employees.
You don’t need a study to verify basic economics. If employers don’t want to pay the head tax, they will offer incentives to their employees not to drive alone. If they don’t care, it should be higher.
The small company I work for in downtown Seattle made it abundantly clear, both in prose and in rewards that they preferred us to walk/bike/use transit. We hear(d) about it every March.
Scottie,
Please read the post again, as I basically make your point in the last paragraph.
It’s hard to design a less-effective deterrent to single-occupancy commuting than a small tax paid once a year by an employer.
It’s a negligible amount of money to begin with — for many employers, it’s lost in the noise, not worth the overhead to document which employees don’t drive to work.
Then, it’s paid by the employer, not the employee.
Finally, it’s a once-a-year tax, which means it has no bearing on the daily decision to drive or take alternative transportation.
An effective deterrent would be large enough to be noticed, paid by the employee, and paid as near as possible to the decision to commute each day.
The same tax burden, applied as a ten-cent-per-day parking tax, would at least tie the deterrent to the daily decision to drive. ($25/year divided by 50 weeks @ 5 days each = 10 cents a day.) But you won’t change much behavior at ten cents a day no matter how you bill it — that’s 42 seconds at minimum wage.
Was the head tax one of the reasons employers (like mine) give us free yearly flex passes?
i.e They can say that so and so has a bus pass so we don’t have to pay the tax for him?
Your company providing you with a free bus pass could be due to the Commute Trip Reduction act, which applies to larger companies and is a fairly successful program.
http://www.wsdot.wa.gov/TDM/CTR/overview.htm#goals
Or your employer could just be providing your bus pass as part of your benefits package.
You can thank the federal tax code: tranit benefits are tax free to employees (under $230/month) and tax-deductible business expenses to employers. Basically, they are never taxed. That is worth a lot more than $25. My free bus pass (from my employer) saves me roughly $262 in taxes each year compared with my employer paying me an equivalent amount in salary.
IMO, it is one of the few sensible exclusions in the federal tax code.
I think what you are describing is a pre tax benefit. What ever is taken out of your paycheck reduces your taxable income. You still pay for it but because of the tax code you’re income tax is reduced as if your pay had been cut by that amount. It’s the same way the mortgage deduction reduces your tax payment (except only the interest is deducted from the taxable income, not the entire mortgage payment). I agree that it is a sensible exclusion. I don’t know how many exclusions I’d put it in the sensible category but I’m pretty sure the sensible category would be in the minority if I (or anybody outside a small minority of tax lawyers) actually knew the details behind the thousands of pages (and many thousands more pages of court rulings) in the federal tax code.
I agree, but to sadly burst your bubble, this part of the tax code also allows for a similar deduction of employer provided PARKING benefits… :(
In fact it was only in the last year or so that Congress brought the transit exemption up to the same level as the parking exemption.
You can’t get much of an annual pass for $25 — it’s only a small added incentive on top of state and federal incentives. Plenty of employers outside Seattle maintain transit subsidy programs without Seattle’s minor tax hit, though it does make the programs slightly more attractive in the city than out.
Taxes shouls exist for one purpose and one purpose alone, raising revnue. If a tax is created for any other purpose than it need to be gotten rid of. It does not matter what the tax goes for. It could lead to abuse by goverment.
I admire the purity, but you need to remember, whatever you tax, you deter, whether you intend to or not.
When you decide where to raise your revenue, it only makes sense to tax things you want less of. Don’t create a tax just to be a deterrent if you don’t need the money, but don’t ignore the effect your necessary revenue measures will inevitably have.
Well, does that mean that the goverment wants fewer people owning property. People sometimes have to sell there homes or other properties because they cannot afford the taxes on them.
So you would support the repeal of our State’s onerous liquor and tobacco taxes?
Actually, yes I would. I do not mind the standard sales tax on these items though.
$25 a year?? The anti-tax zealousy in the US is insane.
Yeah, I spent that much money yesterday filling up my gas tank halfway after not touching the car in the garage for months.
For a few bucks less I get an unlimited $2.75 transit pass good for a month from my employer (City of Seattle).
Yes, it is insane that people want to keep more of what they earn. How dare they want to keep what is rightfully theres when those who do nothing to earn it are more entitled to it. After all the people are to stupid to know what is best for them and their money.
There ain’t no such thing as a free lunch.
There is no free lunch. The problem is that we have goverments on every level doing things they have no business doing. If all levels of goverment would only do what goverment has to do then everyome’s taxes will be kept to a minimum. Also, if a tax is unjust then it should not exist. It does not matter how much is raised, who it affects or what it goes for.
I smell a troll – especially since you are writing about people who are “to stupid” and how people “want to keep what is rightfully theres”.
How about attacking this tax with some facts instead of the tired old line of people keeping “their money”.
The “to stupid” comments were scarcastic. I do not feel that way.
I’m not sad to see this tax go as I agree that it doesn’t seem to be an effective way to get people out of their cars. I am sad to see the lost revenue for biking and walking improvements — clearly our city needs them. I would hope the city council replaces the lost revenue by increasing on-street parking fees and the taxes on private parking lots.
Write Council. There was no “populist outcry” against this tax, nor (sadly IMO) enough popular uproar to keep it. We have hundreds of millions in needed ped and bike projects (all of which of course tie in well with a transit-oriented, sustainable, walkable city) and although Conlin has talked a good game, I see no evidence of any planning on his part to actually generate some additional revenue. Nick’s proposal is the first concrete one I’ve seen.
A PS to Adam – talk to Jodie Vice, Jan Drago’s aide (for another few weeks anyway, then she’s on her way to SDOT) about the history of the Beacon Hill project you mentioned in the original post. It’s a good story :)
Or, Adam could refer to the post which actually talked about the Lander Street project :( Sorry.
I think the tax was “opaque” to the commuter, since he couldn’t see the details…