This is really quite glorious. Seattle has a plan to tax large companies in Seattle a little more. OK, well, go with it if that’s what you want to do. It’s only ghastly little neoliberals like myself who will point out that there might be some effect of this. Like, perhaps, business not turning up to pay the extra tax. Guess what? The complaints now are that Amazon isn’t turning up to pay the extra tax:
On Wednesday, Amazon announced the company would halt the construction of a new building in downtown Seattle it was planning to build, jeopardizing some 7,000 jobs.
Why? Because the company opposes a tax being considered by the City Council.
The tax targets 500-600 businesses in the city that gross at least $20 million a year. The companies would be charged a “head tax” at $500 per employee. In 2021, the head tax would be replaced by a 0.7 percent payroll tax. The payroll tax would windup costing Amazon more than the initial head tax, considering Seattle Amazon employees are paid about an average of $110,000 per year, according to data from job-reviews site Glassdoor.
If you tax something you’ll get less of it.
The city estimates the tax would raise an estimated $75 million annually, with Amazon paying roughly $20 million in 2019 and 2020. One might think for a company that pulled in $1.6 billion last quarter, they could afford to help out the city of Seattle and its most vulnerable residents, especially considering the extent to which Amazon’s presence in the city has exacerbated the housing crisis there.
It’s still true that if you tax something you’ll get less of it. Tax big business in Seattle more and you’ll get less big business in Seattle.
How much less depends upon elasticity. One description of that being well, how easy is it to dodge the new tax? As Amazon can stick its new building of office drones just outside Seattle city limits it’s actually pretty easy. Therefore the reduction in business activity from the institution of the tax will be quite large – elasticity.
All of which is the truly terrible thing about ghastly little neoliberals like myself. We’re right – the universes, or at least the humans within them, do act and react in predictable ways. Demand curves do slope downwards, taxation does produce less of whatever is being taxed.
No, that doesn’t mean that we should never righteously tax businesses. No, it doesn’t mean that the richer among us shouldn’t pick up a more than proportionate part of the burden – heck, even Adam Smith agreed with that one. What it does mean is that you’ve got to be careful with how these things are done. Because there will be those reactions. Sometimes those reactions being so large as to bring about the opposite of what was intended. Like, you know, the best evidence we have about Seattle’s minimum wage rise being that it has reduced the incomes of those on minimum wage? Or the widespread evidence that legislating housing prices to be cheap makes them more expensive?
Tax Amazon more for doing business in Seattle and Amazon will do less of its business in Seattle. What’s so tough to understand about that?