If you don’t like Seattle’s income tax, then you can get out.
It’s a sentiment perhaps more appropriate for an episode of South Park, but that was the message the city of Seattle sent to residents during a November 17 King County Superior Court hearing over the ordinance’s legality. A decision by the judge is expected this week on whether the 2.25 percent income tax on high-income earners violates the state constitution as well as state law.
Paul Lawrence of Pacifica Law, which was hired by the city, said during the hearing that “If they don’t like the tax consequences that Seattle has chosen to do an income tax, they can move to Bellevue.”
However, even if the income tax is tossed out by the courts, many Seattle small business owners, entrepreneurs and venture capitalists may take the city up on the suggestion.
“They act like they’re so damn bulletproof, but they’re not,” Bellevue City Councilman Kevin Wallace said. He is also the president and chief operating officer of Wallace Properties, a Bellevue-based commercial real estate company. His term is set to expire next month, as he chose not to run for reelection.
Many of the state’s (and world’s) wealthiest residents live on the Eastside. Billionaires Bill Gates, Charles Simonyi and Jeff Bezos live in Medina, a small residential city adjacent to Bellevue, while Microsoft’s Steve Ballmer and Craig McCaw live in the town of Hunts Point just north of Bellevue.
And if employers want to find greener pastures elsewhere in Puget Sound, they won’t have to look far for labor and infrastructure. According to the Economic Development Council of Seattle & King County, the county alone has 39 cities, with two million residents composing 60 percent of the region’s workforce as well as 70 percent of its economic output.
In Bellevue, 6,5000 new tech firms are expected to open through 2020, and 45 corporate headquarters already call the city home.
However, the plaintiffs opposing the income tax seem hopeful it will be stuck down. Opportunity for ALL Coalition founder and venture capitalist Matt McIlwain wrote in a statement that “we are confident the Court will rule in our favor, but expect the illegal tax’s advocates to appeal to the Supreme Court. Sadly, this continues a process that has wasted taxpayer dollars while attempting to reverse nearly 85 years of Supreme Court rulings that, under Washington’s state constitution, income is property and must be taxed uniformly.
“This will be an important victory,” he wrote further, “but the fight is not over. We must continue to highlight why the City’s income tax approach is illegal and wrong, and that its supporters’ ultimate goal is a statewide income tax – even though similar proposals have been rejected by Washingtonians ten times already.”
But the income tax is only one among a growing number of new financial burdens Seattle has pushed onto the business community, and it’s something that Wallace says makes Bellevue stand out as a friendlier environment.
“The first step is what we’re not doing,” he said.
Those regulations include:
- A $15 minimum wage law that killed 5,000 jobs;
- A micro-managing “secure scheduling” ordinance;
- The unionization of Uber;
- A nightly tax on Airbnb and other short-term rentals; and
- A proposed head tax, which the council narrowly rejected, 5-4.
“Seriously, Bellevue does not get enough credit for what it doesn’t do,” Wallace said.
“I think that the Bellevue City Council unanimously does not view business as the enemy. We view business as a friend. These businesses are our neighbors. I’m just not getting the mindset of the Seattle city councilmembers when they’re passing these things.”
Bellevue is part of a regional bid for Amazon’s second headquarters involving eight cities and the Tulalip Tribes in King and Snohomish counties – though Seattle is not among them.
The city of Bellevue may have reasons to be optimistic. Earlier this year, Amazon announced it had leased the entire 354,000 square foot Schnitzer West’s Centre 425 Project in downtown.
“We’re thrilled,” Wallace said. “There’s great employees working in that building. I hope they continue to expand here in Bellevue.”
However, while Lawrence’s comment may make a great tongue-in-cheek slogan for the Bellevue business community, Wallace says having a mass exodus from Seattle to the Eastside is not a viable long-term strategy for the region.
“I think that the problem is that Bellevue is one-fifth the size of Seattle,” he said. “What we really need to be focused on is getting Seattle to be a more welcoming and compatible place for businesses. Some companies are going to continue to move over here and we want that to some degree…but not all of Amazon can transplant.”
As Amazon looks for a location outside of Seattle for its second headquarters, the Seattle City Council might consider the situation after Washington Mutual closed its doors in the largest bank failure in history. Seattle Met writes that at the time, “doom-and-gloomers feared downtown would become a ghost town” due to the office space left empty following the bank’s closure. Most of the current councilmembers were not serving at the time.
“The Seattle city council needs to go back into the history books and remember what things were like in 2009 when Washington Mutual disappeared,” Wallace said.
Incidentally, it was also around that time CNN Money named Bellevue the best place in the country to live and launch a business.