Cathy Moore says the 2% tax would generate $16-51 M in the first year, which seems like a big range (https://www.kuow.org/stories/seattle-could-get-its-own-baby-capital-gains-tax). For a tax of this type, is it good practice to let it go to the general fund or specific causes, to promote good things / stop bad things? The intention seems to plug holes in the budget, but the upper end of $51 M seems like it could be used for a modest impact (that’s like $69 per Seattleite per year). Going from the top 0.1% income to about the top 10% (from 800 to 80,000) also seems to make the tax less avoidable without having adverse effects on the top 10%’s material conditions. What are the arguments city council members would make against the “tax more people but 1 hundredth of the rate” version?
It is a big range! Capital gains taxes are volatile, because stock prices are volatile. In a year when the market is down capital gains will tend to be much smaller.
Economics suggests you should always place revenue in a general fund for greatest flexibility. The rationale for earmarking taxes for specific uses is largely political -- witness the debates over ballot propositions this year where part of the argument against repealing taxes rested on the things those taxes were funding.
And the main argument against a much smaller tax on a larger number of people is once again political. A tax on the 0.1% is, for 99.9% of the population, a tax on somebody else. A tax on 10%, when those 10% are probably active voters, more likely to generate active opposition.
Cathy Moore says the 2% tax would generate $16-51 M in the first year, which seems like a big range (https://www.kuow.org/stories/seattle-could-get-its-own-baby-capital-gains-tax). For a tax of this type, is it good practice to let it go to the general fund or specific causes, to promote good things / stop bad things? The intention seems to plug holes in the budget, but the upper end of $51 M seems like it could be used for a modest impact (that’s like $69 per Seattleite per year). Going from the top 0.1% income to about the top 10% (from 800 to 80,000) also seems to make the tax less avoidable without having adverse effects on the top 10%’s material conditions. What are the arguments city council members would make against the “tax more people but 1 hundredth of the rate” version?
It is a big range! Capital gains taxes are volatile, because stock prices are volatile. In a year when the market is down capital gains will tend to be much smaller.
Economics suggests you should always place revenue in a general fund for greatest flexibility. The rationale for earmarking taxes for specific uses is largely political -- witness the debates over ballot propositions this year where part of the argument against repealing taxes rested on the things those taxes were funding.
And the main argument against a much smaller tax on a larger number of people is once again political. A tax on the 0.1% is, for 99.9% of the population, a tax on somebody else. A tax on 10%, when those 10% are probably active voters, more likely to generate active opposition.