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The Downtown Seattle Association Cries Wolf (Again)

Imagine believing your own prank, time and time again.

Like that embarrassing uncle at Thanksgiving, the Chief of the Downtown Seattle Association made things awkward when he lost his mind last week on LinkedIn.

The reason? For the first discernable moment in Seattle Mayor Harrell’s 15-year political career, he supports a tax that will modestly impact rich people more than poor people. While this has long been the basic stuff of the state and national Democratic Party platforms, such mainstream policy has always been way too left for Harrell.

But the Mayor faces a spirted challenge from the left and terrible approval numbers, so he finally has decided to get just a pinch of that old-time Democratic Party religion.

Harrell is working with (actual progressive) City Councilmember Alexis Rinck to let November voters eliminate Seattle “business and occupation” taxes for firms under $2M in annual revenue, while simultaneously raising the rate on larger businesses. 76% of Seattle businesses would be exempt, and 90% would pay less than they do today. But the increases on bigger businesses are projected to increase city revenue by $90M a year. While a significant chunk, this is still far less than the expected revenue gap of $250M near year, plus any losses from Trump cuts.

Still, even this modest tax that is very modestly progressive provoked a howling response Jon Scholes, who represents Seattle’s “Paul Ryan gets me” commercial real Estate establishment.

Beside his DOGE-stye mythology about money just laying around, cringe inducing histrionics, and fail-the-SAT analogies (de-fund the police & restructure and raise B&O taxes, really?), I’d like to suggest that the biggest problem here is the unserious repetition of his religious creed that taxes drive away businesses.

I usually don’t get into the mix much on LinkedIn, but I decided to wade into the conversation. If you’d like to weigh in, please do. Tell me why I’m wrong if you think so, or repost my post if you think the businesses community needs a more serious discussion about taxes.

This post disappoints me so much. Imagine being the boy who cried wolf, and yet actually believing your own prank, time and time again.

Imagine working in economic development and consistently ignoring actual economics research from the top scholars in the world—including the federal reserve—on the impacts of local taxes on local economies.

Scholes on Rinck's tax proposal in Seattle: "if [the 0.223% tax on large businesses is] passed [it] will ultimately result in Seattle defunding its tax base...a boneheaded proposal of epic proportions."

Beside the fact that this is a completely unfounded claim, we need only look to Scholes' other confident predictions to get a sense of how seriously we should take this.

Scholes in 2020 On JumpStart - “The city should immediately repeal this shortsighted tax before permanent economic damage is done.”

The wildly successful payroll tax on high-earnings not only bailed out the city last year, but has grown from $214 million at implementation in 2021 to $360 million last year as jobs didn't flee - they boomed.

Then there is Scholes in 2014: "The minimum wage increase and the existing paid sick leave requirement . . . could be borne by existing employee [sic] in the form of reduced benefits or reduced hours. These costs could also make it more difficult for Seattle employers to create new jobs."

The impact of these was also not remotely as Scholes predicted.

On Seattle's then country-leading wage increases, studies are mixed--one claimed extremely modest employment effects, more studies said no such impacts plus significant increases in earnings.

Our sick leave requirements INCREASED work hours, did not decrease work attachment, and cost far less than predicted.

Scholes' confident claims also ignores the copious economics research on the actual impacts of local taxes impact on GDP, job growth, job migration, and startup formation. Like RFK JR., the reliance here is almost all on innuendo and anecdote, totally ignoring scientific measurement.

We also already go light on our rich and heavy on everyone else when it comes to taxes in WA, more so than 48 other states. We have lots of wiggle room to improve this before becoming an outlier in the "tax the rich" sense.

Finally, this kind of rhetoric flagrantly ignores the fact (which he knows) that local and state spending as a share of our economy since 2009 are roughly FLAT, even though we are much richer. Most economies, as they get richer, dedicate more of their earnings to those left behind rather than aiming to be miserly.

(B&O taxes aren't my favorite way to do this btw, but I'm guessing the Mayor forced Rinck's hand on the matter. And the fix for small businesses is great).

You gotta know that when a recession finally does come to Seattle via the broader restructuring of jobs in tech (and thus hits all the tech hubs), or via Trump crashing the economy, Scholes is going to say this globally or nationally caused phenomenon has something to do with Seattle’s B&O tax.

The part I wonder is—will he really believe it?