The voices of Tax Policy Center's researchers and staff
Independence Day is around the corner, and it’s got me thinking about tax protests. Two come to mind. The first, in Boston, shaped our nation’s history. The second is still taking shape in Seattle. Both protests reflect our complicated relationship with taxes and those who levy them. But that’s where similarities end. If you were a taxpayer participating in either, what might you do?
Thought Experiment 1: Look back, in the northeast.
Let’s start with you imagining that you live in Boston in the early 1770s. As a colonist, you’re angry that Parliament is taxing you on products such as paper, paint, lead, glass, and tea to pay off Britain’s French and Indian war debts. (This is especially easy to imagine if you follow tax historian Joe Thorndike [paywall].)
You are less offended by the economic cost of the taxes than the fact that Parliament (where you have no representation) arbitrarily imposed them. You help organize widespread protests, which get attention in London. Britain repeals all these taxes except the one on imported tea, and the demonstrations subside. Colonists are willing to live with the small tea tax — especially since they mostly drink duty-free tea smuggled from Holland.
But then Britain passes the Tea Act, a sort of corporate bailout that cuts taxes on products such as tea, sold by the debt-ridden, inventory-heavy British East India Company. After Parliament repeals the duty on tea exported to the colonies, the East India Company floods the market with a huge supply of tea that is so cheap smugglers can’t beat the price. It is a win/win for London: The well-connected firm clears out inventory and makes a few pounds while British Parliament collects some much-needed tax revenue from the colonists.
But a group of radicals joins with some Boston businessmen to organize mass protests against both the tax-subsidized East India Company and Parliament. Now, Boston’s tea-selling merchants are battling their monopoly supplier (the East India Company) at least as much as the Crown’s taxation without representation.
On December 16, 1773, you and your friends sneak out to Griffin’s Wharf, board the company’s ships and dump the East Indian cheap loose tea into the harbor. It’s a bit like a very targeted, soggy, business boycott. And it grabs attention.
Protests spread and, a few years later, break out into full-blown revolution. Now, fast forward 245 years to…
Thought Experiment 2: Look to the northwest.
Imagine you live in Seattle. The city’s recent economic boom is slowing, and so is growth in sales tax revenue. If current trends continue, Seattle officials say the city will end up about $28.5 million in the red in 2019. But housing prices remain sky-high, and many of your neighbors blame nicely paid employees of big businesses like Amazon for driving up housing demand. Meanwhile, the demand for homeless services and affordable housing is growing.
Seattle can’t raise traditional taxes easily, or at all. It just raised property taxes a couple of years ago and is likely to soon extend those levies to pay for new education initiatives. Its combined state and local sales tax rate already exceeds 10 percent. And Washington State bars the city from imposing an income tax.
So, last month your city council unanimously adopted a scaled-down per-employee “head tax” collected from about 600 of Seattle’s largest employers. The $275-per-employee levy is expected to raise about $50 million a year, with revenues going to support affordable housing and homeless services. The city’s largest employer, Amazon, will pay about 20 percent of the tax. As TPC’s Steve Rosenthal and Richard Auxier conclude, the city is using perhaps the only available tool in its toolbox to raise revenue.
But if you’re a business owner in Seattle, you might agree with TPC’s Howard Gleckman and object to the head tax. You might even back a petition drive to put repeal on the November 2018 ballot.
Big companies that owe the tax, such as Amazon and Starbucks, have contributed over $350,000 to the referendum effort. These larger companies hope they can build on their discontent to overturn the recently-enacted tax. But even small businesses that are exempt from the tax are unhappy.
Neighborhood pizzeria and wine bar owner Dan Austin says, “I’ve already been told by the majority of my vendors that their prices will be going up [because of the head tax]. So that means I will pass along as much as I can to my customers through menu increases. Can’t pass it all along. So for the third year in a row, I will do more in sales and make less in profit.”
Then again, you as a consumer might be asked to participate in a boycott of businesses that want to repeal the tax, including, perhaps, Austin’s pizza place. He sees the boycott as an intimidation tactic “to try to get us not to fight this.”
He may be right: While anti-repeal organizers seem unwilling to use the “B” word, a counter-protest has found its way onto social media, with the support of one city council member who is not talking to reporters about it.
Available evidence, such as it is, suggests that today’s boycotts may indeed be more bark than bite. But the negative media attention from a modern day business boycott sometimes can change a business’s behavior. Just ask the supermarket chain Publix that was contributing to a pro-gun rights gubernatorial candidate in Florida. In the face of intense negative media attention driven by survivors of the Parkland high school massacre, it stopped making donations.
But what of Seattle? Paradoxically, world-wide retailer Amazon—which is leading the repeal effort—would hardly notice a hit-or-miss local boycott. But Dan Austin’s pizzeria might suffer real economic damage, even though he is merely a follower of the repeal effort.
Will history repeat itself?
Unlike Boston’s mercantilist class, it can hardly be said that Seattle businesses suffer from taxation without representation by a distant imperial government. They already succeeded in getting the city council to scale back its original head tax by half and have a good chance of getting repeal onto the ballot in a few months.
And this time, unlike Boston’s tea party, many Seattle businesses are not on the same side of the tax issue as many of the city’s most vocal residents.
Still, Seattle’s business community continues to collect signatures to get head tax repeal on the November ballot. And pro-tax residents may be organizing a boycott. But nobody’s throwing Starbucks coffee beans into Puget Sound. Yet.
The Tax Hound, publishing the first Wednesday of every month, helps make sense of tax policy for those outside the tax world and connects tax issues to everyday concerns. Need help or have an idea? Post a comment, or send Renu an email.
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
In this Monday, Dec. 11, 2017 photo, visitors to the Boston Tea Party Museum throw replicas of historic tea containers into Boston Harbor from aboard a replica of the vessel Beaver, in Boston. The museum is encouraging Americans to send unused tea leaves to toss into Boston Harbor as part of the Saturday, Dec. 16, 2017, annual re-enactment of the historic act of defiance that led to the Revolutionary War.
Steven Senne/AP Images