STREET SMART ECONOMICS | Prepare to step up locally, in case the feds don’t
The crisis of affordable housing can only be met by a well-funded government program to buy, renovate and build excellent public housing. The private sector has not and will not meet our housing needs, and the federal government has spent the past 40 years gutting a public housing program that was never adequate.
We need to be preparing to do as much as we can at the state and local level, as it’s unlikely that the Biden administration will enact a housing program big enough to end this crisis.
To do that, we’ll need to raise some serious money. The major brake on state and local housing efforts is limited resources, especially compared to the federal government. The COVID-19 pandemic and the wildfires have further strained state and local budgets, due to reduced tax revenues and greater needs for public services. Portland Mayor Ted Wheeler has called for 5% cuts in the 2021-22 budgets of all city departments with more than 30 employees. Oregon Gov. Kate Brown anticipates the need to pull significant resources from state reserve funds, as well as to raise new revenues, to fund the governor’s proposed budget for the next two years.
Here are some new models for funding housing and other needs in Washington state:
Seattle’s ‘Amazon Tax’ to create affordable housing and green jobs
While also facing cuts as high as 10%, Seattle’s City Council took a different route last July. It passed an ambitious affordable housing bill, funded by a new JumpStart Tax, more commonly called the “Amazon Tax,” on the city’s biggest corporations and their highest-paid employees —expected to raise at least $214 million a year.
Revenue raised in 2021 will go to pay off a loan for coronavirus relief spending in 2020, and continued relief efforts in 2021. Starting in 2022, the City of Seattle plans to dedicate
- $133 million annually to creating low-income and affordable housing, as well as a housing investment fund to counter the impact of housing policies that discriminated against Black, Indigenous and other people of color, such as red-lining and racist covenants;
- $39 million a year in Green New Deal and Equitable Development projects;
- $32 million a year in economic development in the form of small business assistance and worker training; and
- $10 million in program administration.
The revenue source is an unusual payroll tax, levied only on the top 2% of companies, those with a total payroll over $7 million a year, and only on the salaries of their employees paid more than $150,000 a year. The average tax rate is 1.3% of payroll, ranging from less than 1% on salaries just over $150,000 and up to 2.4% on salaries over $400,000.
Many payroll taxes, like Social Security, take a bigger proportion of lower incomes than of higher ones, but the design of this payroll tax means that it will be paid by the affluent rather than people with lower salaries. The cost of this tax will fall on the shareholders of very profitable companies, who are generally wealthy, and people being paid many times what the average worker makes in Seattle, which was just under $50,000 a year in 2018.
Washington’s bill to tax billionaires' financial assets
Some Washington legislators intend to make the state’s tax code more equitable, as well as pay for badly needed public investments, proposing House Bill 1406 to tax the worldwide wealth of billionaires. They’re calling for people with over $1 billion in financial assets such as stocks and bonds to pay an annual tax of 1% of the value of those assets.
Like Oregon, Washington taxes wealth held in the form of real estate with its property tax but does not tax personal property like financial assets, which are called “intangible” property.
If enacted, Washington’s new wealth tax is estimated to generate $2.5 billion a year, according to John Burbank, of Seattle’s Economic Opportunity Institute. If the state taxed everyone with financial assets over $100 million, they’d raise another $3.5 billion, for a total of $6 billion annually.
To put those figures in perspective, Burbank said it would cost the state $3 billion a year to make Seattle’s sliding-scale school-year preschool program universal statewide, if the teachers were also paid living wages. Or, if we were to think about scaling up Seattle’s housing program, $6 billion would pay for 67,000 homes in five years, including supportive services for households with very low incomes and environmental renovations.
Could we do that in Oregon? Absolutely!
We could put a measure on the city, county, metro or state ballot to create affordable and supported housing, as Seattle is doing. The measure would likely be very popular, given what a big problem the cost of housing is for the majority of the community, and the high priority the electorate puts on ending homelessness.
Proposing a payroll tax like Seattle’s “Amazon Tax” would mean preparing for the likely opposition of big, extremely profitable corporations — though Amazon, Boeing and Microsoft weren’t able to stop its passage in Seattle. I’m sure we all remember the boatloads of scary glossy mailers opposing the payroll tax proposed by Metro for a huge, regional transportation measure last fall. Nike, Intel, The Standard and Daimler Trucks ponied up $100,000 each to fight that measure, joined by Comcast and Lithia Motors at $75,000 a pop.
It might be more strategic to create a financial-assets tax instead, either locally or statewide. Wealthy individuals are not as organized as Big Business. The fact that financial assets are already taxed by Oregon’s estate tax, as well as Washington’s and the federal estate taxes, means that it can be done. A lot of states and localities used to have taxes on financial assets, as recently as 2007 in Florida.
The first step would be campaigning to lift Oregon’s legal ban on taxing “intangible” property, except as part of the estate tax. That would likely require a majority vote in the Legislature. Rural legislators, who generally oppose new taxes, might support ending the ban on taxing financial assets, as a move toward equity between rural and urban areas. The rural elite already pay taxes on much of their wealth, held in land and subject to property taxes.
Wealth inequality is not only extreme in Oregon and the U.S., but it is also growing rapidly. Billionaires have done particularly well during the pandemic, as the stock market soars while children are growing hungry and more than 480,000 people have died.
As presidential candidates, Sens. Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont) proposed wealth taxes for the nation. Polling consistently shows very strong support for raising taxes on the wealthy. Whether locally or statewide, Oregon could lead the way by funding a large program for affordable, supported, publicly controlled housing with a tax on financial wealth.
CORRECTION: An earlier version of this article misstated the details and dollar amounts associated with the JumpStart Tax. Those details have been corrected. Street Roots regrets the error.
Street Smart Economics is a periodic series written for Street Roots by professors emeriti in economics. Mary C. King is a professor of economics emerita, Portland State University.
Street Roots is an award-winning, weekly publication focusing on economic, environmental and social justice issues. The newspaper is sold in Portland, Oregon, by people experiencing homelessness and/or extreme poverty as means of earning an income with dignity. Street Roots newspaper operates independently of Street Roots advocacy and is a part of the Street Roots organization. Learn more about Street Roots. Support your community newspaper by making a one-time or recurring gift today.
© 2021 Street Roots. All rights reserved. | To request permission to reuse content, email editor@streetroots.org or call 503-228-5657, ext. 404.
