To look at the Pacific Northwest today one would never know that 25 years ago the region was an economic powerhouse at the forefront of technology and business innovation. At the time Portland and Seattle were known for constant rain as well as raining cash, and the “millionaire density” of the Seattle area was at historic highs. The tech boom and international trade with Asia had created a Silicon Valley of the northern coast.
Companies like Nike, Starbucks, Microsoft and Amazon established corporate offices and generated tens of thousands of jobs, and many of those jobs were considered high income. People can debate the overall effects of the population surge to the region; there are many who would argue that Washington and Oregon were better off when they were considered backwoods fishing and lumber states. That said, it’s undeniable that for a time the Northwest was one of the most desirable and lucrative places to live in the US.
That’s all gone now. The wealthy are leaving Seattle like it’s a leper colony and all that’s left are millions of broke activists, poverty stricken residents and illegal immigrants. Some blame the constant riots or the steady stream of welfare recipients. Others say that the draconian covid mandates caused people to jump ship. However, a primary factor in businesses (and money) leaving the city was the institution of a progressive “Payroll Expense Tax”.
The PET is a quarterly tax approved by the Seattle City Council in 2020 in the middle of the Covid hysteria. It increases taxes on businesses depending on how many employees they hire and how much their employees get paid. In other words, it punishes companies that hire more people and pay them a good salary. The conditions of the PET are very similar to what Democrats say they want for their “Wealth Tax” – An extra tax on top earners and large companies beyond the income tax.
Democrats were high on their own supply in the early 2020s and in their fervor to destroy conservatives they instituted every suicidal policy imaginable, from defunding police to near-zero prosecution for property theft under $1000. It’s not surprising that wealth taxes were established at the same time to “stick it to the capitalists”. What they seem to have forgotten, though, is that communist tactics don’t work if people and businesses are able to walk away, and that’s exactly what has happened in Seattle.
Larger businesses are packing up and leaving the Northwest as quickly as they arrived. Amazon, Meta, Google and Expedia are the most prominent examples of companies exiting the Seattle labor market and hiring elsewhere to avoid the Payroll Tax, but there are numerous others.
The Emerald City is facing a dangerous budget shortfall which has the council and the mayor in a panic. Payroll Tax revenues indicate a surprise decline of over $47 million, far less than expected. To understand why this is such a big deal, keep in mind that Democrat cities have a habit of budgeting based on projected earnings. Meaning, they launch various programs based on the money they assume they will get instead of the money they actually have.
Seattle Mayor Bruce Harrell acknowledged that the drop in payroll tax revenue will significantly impact the city’s budget for future years. He blamed Seattle’s large businesses for shifting employees to offices outside of the city to avoid the tax (everyone warned Democrats that this would happen and they didn’t listen).
“Large corporations should pay their fair share and we should be wary when they use job placements to avoid paying funding that our communities rely on, but we also must recognize businesses will make choices based on their bottom line…We need to design our tax policies with the full context of our economy and a comprehensive view that ensures we raise the revenue needed to support all of our residents in a progressive way, aligned with our values.”
How does the mayor suggest the problem be solved? Well, Seattle is already stuck with a multitude of programs they slated for funding before revenues were counted. So, Harrell hinted that “additional sources” may need to be taxed to fill the gap left by the PET. What does that mean? Most likely, new taxes on the middle class. As Harrell notes…
“We will be closely monitoring OERF’s April forecast to understand the full implications and what steps are necessary to maintain a balanced budget. As we develop the City’s 2026 budget, my office will consider all options, including additional revenue sources and appropriate expense reductions, to ensure we are making the priority investments and funding the essential services that matter to our residents…”
When wealth taxes fail, the Democrat Plan B is always to feed off the middle class through methods like new sales taxes or gas taxes. Seattle is already in the midst of an economic decline and a budget shortfall of this size is a crisis. Not only did their new taxes cost tens of thousands of jobs for the area, but they increased their spending projections, counting their chickens before they hatched.
Insanely, Democrats in Washington still want to pass a similar Payroll Tax system for the entire state (due to their own budget problems) despite the fact that it has been an unmitigated disaster in Seattle. The economic events in Seattle and the Pacific Northwest in general are a canary in the coal mine for the entire nation; a warning of what is to come if Democrats are allowed to continue running some of Americas biggest metropolitan areas.
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