Regional/local income tax initiatives in Portland, Seattle are focused on high income households/businesses

The reason that Amazon was "all in" on last fall's local election in Seattle ("Today's local elections in Seattle: the clash between progressive and business interests") was because Socialist Kshama Sawant had pushed forward a head tax on employees. It was later rescinded because of threats by the business community, but Amazon still decided to move a big division to suburban Bellevue, and then put a lot of money into the local elections, with the aim of electing more business friendly candidates, but except for one seat, they lost in every instance.

But one of the criticisms of the tax was that certain kinds of businesses with lots of employees but low margins, like supermarkets or restaurant groups, would be stuck with big costs that would make doing business unaffordable.

In May, voters in Greater Portland, the Portland Metro government covers three counties--Multnomah, the location of Portland, Clackamas, and Washington--passed a regional tax to pay for the support services for the homeless ("Portland Region Voters Approve a Tax on Wealthy Households to Fund Homeless Services: The $250 million-a-year measure aims to end chronic homelessness," Willamette Week).  It's a companion measure to a previously passed bond issue to pay for the construction of housing.  From the article:

[Put on the ballot] Before the COVID-19 pandemic devastated the Portland economy,Measure 26-210 was projected to raise $2.5 billion with a 1 percent marginal tax on couples earning more than $200,000 and a 1 percent tax on profits for large businesses.

This is a step forward because the reality is that housing and homeless issues are regional, not just a matter for the center city to deal with on their own.

Of course, having a multi-county government, a step beyond the merged city-county form that I often advocate, and which is in place in cities such as Indianapolis, Lexington and Louisville, Kentucky, and Macon, Georgia, makes this achieveable.

Seattle hasn't given up on taxing high income corporations like Amazon, and now they've introduced a new kind of withholding tax, levied only against high income jobs, paying at least $150,000. From the Seattle Times article "Call it the ‘boss tax:’ Seattle finally finds a potent way to tax the rich":

It’s the work of Council member Teresa Mosqueda, and the premise is simple enough: Instead of tilting at windmills to try to tax wealth or high incomes, which is legally questionable in our backward state, this plan instead puts a levy on high employee salaries and compensation packages.

Call it a CEO tax — or more accurately, a management or boss tax. Oh and throw in the millionaire pro athletes, too. ...

Mosqueda’s plan, which passed a city committee this past week and is expected to pass a full council vote Monday, would place a 0.7% tax on pay in the city higher than $150,000, assessed on the company’s payroll. The rate goes up to 1.7% for pay above $400,000. Then it tiers even higher for the biggest businesses — in other words, Amazon would pay up to a 2.4% levy on compensation north of $400,000. All smaller businesses with payrolls below $7 million are excluded, and no business would pay anything for any worker making less than $150,000.

Washington State doesn't have an income tax and laws make adding straight up income tax levies virtually impossible.  The head tax proposal was a workaround.  A withholding tax on high incomes is a workaround.

Interestingly, I didn't realize that Washington State laws on income taxes prevented the city and state from levying taxes on visiting athletes.  Most states do this.  In part it helps pay for public funding of stadiums and arenas.

DC is unable to do this because Congress forbids the city to tax nonresidents ("Bryce Harper's move to Philly will generate at least $5 million in wage taxes for the city, more if he lives there, compared to zero for DC when he played for the Washington Nationals").  Most every athlete for the city's baseball, hockey, basketball, and soccer teams lives in the suburbs.

There was one soccer player who lived in Greater Capitol Hill, when the team played at RFK ("D.C. United's Clyde Simms has embraced city living," Washington Post) and a hockey player or two ("Former Caps defenseman Mike Green puts a renovated D.C. rowhouse on the market," Post), but they are outliers.

(In the 2018 Stanley Cup winning run by the Washington Capitals, player T.J. Oshie rode Metrorail to Games 3 and 4, "So, what would T.J. Oshie’s Metro card look like?," NBC Sports.)

Separately, Portland Metro has a mobility withholding tax on wages, to support transit.  Elsewhere in Oregon, Eugene has a similar tax.  So do the New York counties with MTA transit service, as do a couple of other places in the US.

The past entry "The real lesson from Flint Michigan is about municipal finance" (2014), outlines various types of city/county taxes.

But I was focusing on local government funding specifically and didn't include a section on transit taxes. This entry, "Metrolinx Toronto: 25 potential tools to fund transit-transportation infrastructure" (2013) covers transit funding mechanisms.

Multinational corporate tax management and "localness"

Recently there were Congressional hearings about how Caterpillar Corporation negotiated a special tax relationship with Switzerland, and created a paper company domiciled there for the purpose of managing transactions for the sale of replacement parts ("Caterpillar Escaped $2.4 Billion Tax With Swiss Maneuver ," Bloomberg).  While the transactions were mostly conducted in the US, for the purpose of taxes, they ran through Switzerland, at a tax rate less than one-fifth of the rate that would be in the US.

And a few weeks ago, it was suggested that Walgreen's, the nation's largest pharmacy chain, which a couple years ago merged with a British company, Boots, should relocate its corporate headquarters to Europe, to reduce its taxes.  See "Should Walgreen Move to Europe for Leaner  Taxes?" from Businessweek Magazine and "If  Walgreen Co. moves its HQ to Europe, blame Washington's tax failure" from the Chicago Tribune (Walgreen's is based in Greater Chicago). From the Tribune article:

A group of shareholders reportedly is pressuring the giant retail chain for a move to the land of cuckoo clocks. The reason: lower taxes. Much lower taxes:

If Walgreen changes its legal domicile to Switzerland, where it recently acquired a stake in European drugstore chain Alliance Boots, the company could save big bucks on its corporate income-tax bill. The effective U.S. income-tax rate for Walgreen, according to analysts at Swiss Bank UBS: 37 percent. For Alliance Boots: about 20 percent.

We hope Walgreen doesn't relocate. Would company executives be smart to do so in order to best serve their shareholders? Hmm. We'd rather not say. So we'll respond to that question with another, broader but similarly urgent question:

How many companies have to turn refugee before Congress and the White House stop their bipartisan talking — but only talking — about the need to reform the federal tax code in general, and the corporate income tax in particular?

This week, Pfizer, a pharmaceutical firm based in New Jersey, announced that it will merge with a British corporation and will move its domicile to the UK, to reduce its corporate taxes ("Pfizer's Move Poses Challenge. Here's a Solution," New York Times) while last week Starbucks announced it will move its European headquarters to the UK, because of new lower corporate tax rates ("Starbucks moves Europe HQ to London," Financial Times).

Apparently the effective US corporate tax rate is about 27% while in Europe it is 21% and the UK has just announced a tax cut so that the UK corporate tax rate will be about 20%.

The NYT article suggests shifting taxes from corporations to shareholders.  From the article:

It’s counterintuitive, but Congress could avoid this problem by abolishing the tax on corporations’ profits and much more aggressively taxing their American shareholders — who are unlikely to flee to London along with Pfizer’s incorporation documents.

I don't know what is a "fair" corporate tax rate, but as long as corporations can play one nation against another, the likely scenario is a race to the bottom.

It's a long way from the "good corporate citizen" discussed in the recent Urbanophile post ("Portrait of a Change Agent") about J. Irwin Miller, a banker and leader of Cummins Engine, which is still based in the comparatively small town of Columbus, Indiana and the various "corporate citizenship" initiatives he undertook which have made the city a great success or how SC Johnson in Racine, Wisconsin is restoring its old research center, designed by Frank Lloyd Wright, and how it has exhibit facilities and gives tours of its campus ("A Corporate Paean to Frank Lloyd Wright," New York Times).