Get ready for a lesson in static tax analysis, progressive hubris, and plain ol’ common sense. For Seattle residents, this lesson just cost them $47 million dollars — and that’s just in one year alone.

The story begins in 2020, when Seattle thought it had found a sure-fire way to boost revenues in order to continue funding their progressive programs. The city council levied a new payroll tax on large corporations to redistribute the wealth as they saw fit. And it worked — the first couple of years. Tax revenues from the new levy exceeded the $250 million projected in 2023, for instance, coming in at $315 million. 

However, the forecast for 2024 was much higher, based on predicted expansion of the tax base. The city based its budget on the assumption that the tax would bring in nearly $410 million in 2024, and that turned out to be … a mistake:

Seattle Mayor Bruce Harrell released his payroll expense tax (PET) report for 2024 Tuesday, and its projections came up nearly $50 million short.

“Today’s announcement that PET revenues collected in 2024 were $47 million lower than projected requires action to ensure our budget remains balanced,” Harrell explained in a statement.

Harrell said that his 2025 budget proposal was based on the projections from the independent Office of Economic and Revenue Forecasts. But since they got it wrong, the mayor said for the 2026 budget, “my office will consider all options, including additional revenue sources and appropriate expense reductions, to ensure we are making the priority investments and funding the essential services that matter to our residents.”

Revenues actually increased from 2023 to $360 million, but unfortunately, the city earmarked $407 million from that revenue stream — and spent the money. Now they have a $47 million hole to cover, and may have to borrow money to make it happen. That would put more pressure on spending, as the debt service will eat up more of Seattle’s annual budget obligations. And since the city stopped reserving this income stream and used it to support the general fund, the term “catastrophic” is being applied by Seattle residents and analysts.

So what happened? Seattle’s progressives likely made the error known as static tax analysis. Static analysis assumes that tax changes will have no change on behavior, and is particularly popular with politicians who want to spend more money. To use a simplified scenario, this type of analysis assumes a 10% increase in tax rates will generate a 10% increase in revenue, basically in perpetuity, because no other potential changes to the economic environment are considered.

But what happens when the tax policy in question creates incentives and disincentives that do change the economic environment? Say, for instance, a city tax hike on employment that makes it cheaper for employers to move offices out of the city’s jurisdiction? That’s exactly what began happening last year:

Despite some slowdowns in the tech sector, it has largely exceeded expectations, particularly as tech stocks climbed during the pandemic. That made it too tempting of a budget plug for lawmakers, who quickly turned to it to buoy the general fund rather than spending it all on affordable housing.

That was particularly true last year, when Harrell and the council made use of more than $250 million of JumpStart to help patch its budget issues.

But during 2024, Seattle saw some employers decrease their presence in the city. Amazon, in particular, grew in Bellevue but reduced its Seattle workforce by 5,000 people.

Amazon warned the city council at the time that they would have to account for the new tax when considering its investment in Seattle. Apparently, the city council didn’t believe that Amazon might find Bellevue more attractive or that they would want to avoid progressive lectures about civic duty from Seattle spendthrifts. When Seattle began finally reopening after their pandemic-related restrictions eased, that likely provided all the incentive that Amazon and other large employers subject to the payroll surtax needed to relocate jobs outside of the city.

Most people could have predicted, though. Most people have common sense and can predict how incentives and disincentives of tax policy act on economic choices. And most people would factor those dynamic changes into tax projections from policy changes, even if predicting those outcomes is more tricky than pretending that nothing changes at all. 

Seattle talk-radio host Jason Rantz scoffs at the city council’s attempt to shift blame to Donald Trump for curtailing federal grants that might have helped cover the budget hole Seattle created. He also warns that the disincentives from the payroll surtax will only keep growing, too:

Mayor Harrell acknowledges that big businesses are leaving. But the he offers a strategically naïve statement: "Large corporations should pay their fair share and we should be wary when they use job placements to avoid paying funding that our communities rely on, but we also must…

— Jason Rantz on KTTH Radio (@jasonrantz) March 26, 2025

… but we also must recognize businesses will make choices based on their bottom line."

Businesses pay far more than their fair share and offer Seattleites high salaries that the city uses on wasteful, ineffective programs. Harrell knows big business already pay "their fair share" but offers his silly quote to try to villainize them, while lionizing his own efforts to go after the businesses he pretends are greedy. But he's the greedy one: he wants more money that he didn't earn so he can continue to misspend it. And he'll target businesses as greedy or deceitful so it can help his re-election campaign.

And he and his fellow progressives will continue doing their best Urkel impersonation: “Gee, did I do that?"