How our tax system works at the federal level has gotten a lot of attention in the last couple of years. Issues of tax fairness and equity have come to the forefront. What has transpired was a recognition that the wealthy had to contribute a larger share towards the burdens of the whole.
Here in Seattle, not much attention has been paid to who pays and how much they pay. Many of us as individuals have questioned our property taxes and even have appealed our assessments and wondered about the arcane workings that lead to disparate valuations between neighbors. But the connection between our taxes and where our money is spent does not get much scrutiny.
Property taxes are the largest source of Seattle’s general revenues, yet they surprisingly only account for about a quarter of all revenues. Sales taxes, B&O taxes, utility taxes, and fees and other sources are each contributes less than 20% of these revenues. And when combined, all make up the $900+ million of our annual discretionary spending – the general fund.
The roughly $220 million in property tax received by the City from King County is only 27% of all of the Seattle property taxes collected – the majority (53%) going to schools. Far less than that ends up in the general fund.
And while it is understood that Washington businesses can pay high B&O taxes, our property taxes are near the median for the country. However Washington State is one of the few states that have no corporate income tax and, of course, no individual income tax. The unfairness and implications of these is well accepted (and the topic for another day).
South Lake Union (SLU) has seen a lot of investment in the last couple of years. The $56M streetcar had almost half paid by local benefiting property owners through a LID (Local Improvement District), and nominally about 25% of the operating costs for the 1.3 mile line come from SDOT’s budget, the bulk paid for by the fare box. But the few hundred million dollars for rerouting the Mercer/Valley “mess” away from the front door of the Vulcan blocks facing the lake (and perhaps soon to be markedly upzoned) came in part from city Bridging the Gap funds meant to address the general street maintenance backlog of the city. And while much is made of Vulcan’s $10M investment in Lake Union Park at their door step, it is hard not to see that they have benefited from the city’s largesse in the area. And overall in SLU, many of the businesses located there are nonprofits and institutions which do not pay taxes at the same rate if at all.
The Central Business District is the real estate gem of the Pacific Northwest. And it is arguable that the many billions spent on Light Rail’s Central Link, the Alaskan Way Viaduct removal and waterfront improvement projects, and other infrastructure investments will largely benefit downtown property owners. The recent $290M Seawall Replacement Levy (that will only address the stretch from South Washington to Virginia St) will be paid for by all Seattle property owners with an additional $30M coming from the City’s general fund, while the waterfront improvements will be done to some degree with a LID. These, along with the viaduct removal and deep bore tunnel, have been projected to increase the property values along this couple of mile stretch by upwards of $2B.
How property taxes are assessed for homes is relatively straight forward when compared to how assessments are made for large commercial properties. A large downtown office tower may have 1M sq ft of office space, but only pay $3M/year in property tax on tens of millions in rent. Are these property owners benefiting from infrastructure improvement projects paying their fair share? The workers in the downtown area do not pay income taxes, and if they travel from outside of Seattle to these jobs, perhaps on a subsidized light rail trip, how do our city’s citizens benefit?
How much do downtown and other commercial business districts contribute to Seattle’s property tax revenue stream? Investments there increase future tax receipts. But are the tax valuations on these properties fair and adequate to fund our endeavors? Or are we facing similar tax imbalances that were called out by the 99%?
To help us wade through the complexity of these issues are King County Assessor Lloyd Hara, and Chris Brown, retired transportation engineer, tax fairness evangelist and chair of the “No” on the seawall levy campaign.
by Bill Bradburd 1/9/2013