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DJC: The Tunnel Will Not Boost Tax Collections

By Josh Feit March 28, 2011

Over at the Daily Journal of Commerce Seattlescape blog, Roger Valdez shoots down a misleading pro-tunnel argument.

The argument is this: Building a tunnel along the waterfront will up property values, enriching the city's tax base—which is good for everyone.

But, thanks to the way Washington state levies taxes, this isn't true. As Valdez explains, we have a budget-based tax system, where local governments can only raise taxes to take in one percent more off property taxes overall than it could the previous year. (It's a bit of a disincentive for investing in development.) In other states, for example, if property values doulbe, so do local coffers.

Here's Valdez:
The reasons why the tunnel won’t help Seattle’s tax base go back to what I wrote here a little while back in long drawn out piece on Tax Increment Financing. Even if the tunnel gets built, Washington’s budget based tax system doesn’t create additional tax revenue for the City no matter how much the project increases property values. In Washington State, annual property taxes are collected based on a city’s previous annual budget plus 1 percent, regardless of how high or low property values go.
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