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Originally Posted by Crawford
Odd response. The question of whether or not it's good policy is largely answered by the potential economic effects. Given the potential economic effects are likely minimal, it appears, at face value, to make sense from a public policy perspective.
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How do you know the potential economic costs are minimal relative to the benefits? Considering all of the positive spillover effects associated with employment, any policy that hurts it immediately faces a high bar to pass on the benefit side. And public policy should aim to find the best solution--not the least-worst. Taxing low-income workers to address homelessness is obviously far from the best solution.
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Originally Posted by Crawford
Why? How is it any less arbitrary than any other taxing scheme, and what's your preferred alternative (city and state income taxes aren't allowed in Washington, BTW).
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Sales taxes and property taxes, for which there are ways to make them less regressive. Less restrictive zoning to address housing unavailability. Or, if it's legislatively possible, a more targeted head-tax would be preferable--say, one for the number of employees making above a specified amount.
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Originally Posted by Crawford
Seattle is booming (and has resulting affordability challenges) largely because of a few large, extremely prosperous employers. Makes sense to look to them first, given that broader schemes like income taxes aren't allowed.
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If you have evidence, theoretical or empirical, that the incidence of such a tax would fall mainly on employers--in contradiction of the overwhelming consensus that it falls on workers--I'd love to hear it. Because if that's the case, we should charge a $1,000 per worker tax on Walmart, a prosperous company; but if you're wrong, that means that Walmart's disproportionately low-skill, low-income workers are going to get soaked.
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Originally Posted by Crawford
Sounds good to me, then. If the negative effects are masked, that sounds like a pretty ideal taxation scheme, given tax policy is inherently political and someone needs to pay.
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Masking =/= counteracting. Masking means that it is difficult to distinguish the effect by looking at rough statistics like unemployment rates or aggregate income. For example, it's been argued that the housing bubble
masked the extent of manufacturing job losses among low-skill men by providing temporary construction jobs. This boom didn't
counteract the problems in that area though; once the bubble burst, we finally recognized the issue--and are dealing with the political consequences today.
Another example is identifying the effects of the minimum wage on unemployment. Minimum wage hikes usually occur during periods of economic growth. That creates an empirical challenge with identifying the effects, since there is the possibility that there exist people who lose their jobs due to the minimum wage but others who find them thanks to the boom. So the debate is not whether a higher minimum wage causes a higher unemployment rate, period; it's about whether it causes higher unemployment
holding everything else constant. In other words, what would the unemployment rate be in the absence of such a policy change?
Unfortunately, it is politically easier to implement harmful public policies in good times because it is harder for opponents to point to clear evidence that there's harm--but that doesn't mean there isn't harm to flesh and blood individuals. It's like saying that if aggregate income doesn't change everything is fine. But what consolation is it to a cashier who sees lower take-home pay due to the head tax to learn that some other guy got a raise due to entirely unrelated reasons [a raise he would've gotten anyway]?
The worst aspect of such policies is that they also make it harder to implement better ones. The average resident will sleep better at night believing they got Amazon to pay to solve homelessness. Meanwhile, more effective and sustainable solutions will continue to be ignored. It's not until you have big problems that these weaknesses come into painful relief; it took Chicago a fiscal crisis, after all, to finally eliminate our boneheaded head tax.