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Seattle income tax would push out the rich? Not true, expert says

Demonstrators stand together in Seattle in support of an income tax on Seattle's top earners. (AP Photo/Elaine Thompson)

The Seattle City Council passed an income tax knowing that it would be challenged in court. It rekindled a debate over whether such a tax would be beneficial for Washington state.

Gregoire: Washington has no ‘appetite’ for income tax

One of the main arguments against an income tax, especially one constrained to city limits, is that people who make enough to be taxed will just move. But that isn’t necessarily the case, Stanford University Professor Cristobal Young says.

Young, who studied tax return data over more than a decade, says there is little tax migration happening with high-income earners.

“People have made claims that there’s nothing more mobile than a millionaire and his money,” he told Seattle’s Morning News. “These kinds of statements sort of sound true, but turn out to be wrong.”

The middle and lower classes are more likely to move. What drives people out is — not surprisingly — economic factors. If you don’t make enough to live where you are, you are more likely to move. High-income earners, on the other hand, can not only afford to live where they want with a “strong economic fit,” they also likely have ties to business that they want to remain near, Young says.

This means the arguments for an income tax may be worth listening to. People in support of taxing those in higher income brackets say it would make the state’s current system less regressive — lowering the burden of sales and property tax.

The Seattle council passed a measure earlier this year that taxes individuals who earn $250,000 or couples earning $500,000.

Young says Washington state is “out of step” with the rest of the country. The state’s taxes “look a lot more like a red state tax regime,” he said.

“It’s a bit surprising. Arguments have been: don’t trust Olympia because they will come for you.”

Though some businesses have hinted that they will leave the region if Seattle or the state imposes an income tax, arguing that it would make it more difficult to do business, Young says that may be all talk. It’s like when Liberals threatened to move to Canada when Donald Trump was elected president.

“Of course they aren’t. It’s just a thing to talk about.”

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