In Seattle “progressive” has simply meant higher property taxes. Affordable housing problems? HALA proposes to double the affordable housing property 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.
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.