Curley: Seattle business tax would burden employees and shareholders, not CEOs

Two Seattle City Council members want to tax Seattle’s largest businesses in order to help support services to aid the city’s homeless population. KIRO Radio’s John Curley says a basic economics principle dictates the money would not come out of the pockets of CEO’s, but rather from customers, shareholders, and employees.

Proposed business tax targets Seattle’s largest companies

Councilmembers Mike O’Brien and Kristen Harris-Talley have proposed a per-head tax on the number of employees for large companies in Seattle. The proposal, they hope, will aid in the city’s effort to combat homelessness. Under the proposal, any company that grosses $5 million or more per year would pay a $100 per-employee tax. This would apply to approximately 10 percent of Seattle companies.

“What I’m looking to do is ask the business community, especially those bigger companies that have benefited from this boom, to contribute to solving the problem for those that have been squeezed out by the very same boom,” O’Brien said.

Seattle’s largest company, Amazon, will have an estimated 70,000 employees in Seattle by 2019. A tax of $100 per worker would be a $7 million tax.

The math left Curley questioning where the money truly comes from.

“Who will pay that?” Curley said. “Where does (Amazon’s) $7 million come from? Where does Jeff Bezos get the money? It’s called incident analysis. It’s something that economists talk about when it comes to taxes. And it basically says, ‘All taxes are paid by people.’ That’s either customers, shareholders, or employees. All of them.

“Jeff Bezos is not going to write a check for $7 million to the city of Seattle. He will either take it out of the employees’ salaries, take it out of the shareholders’, or increase the cost to the customer.”

To study tax incidence is to examine which party pays the taxes placed on a company. Economists generally assume that the burden of any tax falls not on the company itself, but to other groups that make up the organization. According to Forbes, one possible effect of a corporate tax can be lower wages for employees or lower dividends for shareholders.

“Whether it’s Microsoft or Expedia or Nordstrom or Starbucks or Costco, all of these guys with all of these employees will pay these taxes, but the taxes are paid by either customers, shareholders or employees,” Curley said.

Supporters of the proposal argue there are ramifications of a boomtown like Seattle, and the proposal supports services to aid the homeless while also placing the burden on large companies, rather than King County taxpayers. Others argue companies like Amazon have been outspoken about helping to support their community, and that the company – which made $513 million in profit alone in the first quarter of 2016 — is unlikely to wince at the comparatively modest tax.

Also on the side of support are those who encourage wide-ranging efforts to lessen Seattle’s homelessness crisis. As of May 2017, the population of homeless individuals in King County alone had risen to 11,600 people, with nearly 6,000 of those people living unsheltered on the streets. The crisis has remained at the forefront of Seattle’s upcoming mayoral election.

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