Seattle's New Employment Tax Ignores Law of Unintended and Unseen Consequences


Earlier this week, the Seattle city council voted in favor of a new tax on large employers that would cost employers about $275 per employee per year. The justification for the plan is to bring in new revenue that would be used to combat the city's homelessness problem, which the city council also partially blamed on large companies based in Seattle like Amazon and Starbucks. But thanks to yet another anti-employment policy, Seattle's problems will only grow worse.

Brittany Hunter, Associate Editor at the Foundation for Economic Education, writes that the city council is adding to its host of existing problems, including the fact that the city raised its minimum wage to $15 and has yet to acknowledge its detrimental effects. This latest proposal, unsurprisingly, has generated strong opposition from the private sector.

Amazon has been one of the first companies to voice its opposition to this new employee “head” tax. And it is no surprise why. The tax would require every Seattle-based company with revenue over $20 million to pay 14 cents for each hour worked by Seattle residents. This adds up to about $275 per employee each year, which means that these companies will end up paying an estimated $47 million a year for five years. This is an outrageous demand for companies that are doing more for job and wealth creation than all of Seattle’s big-government programs put together. In fact, Amazon alone is responsible for creating over 40,000 jobs.

In response, Amazon spokesman Drew Herdener stated, "We are disappointed by today’s City Council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”

Amazon and Starbucks have both questioned the city's spending habits for some time now, and are concerned about their future there. The fact that they are thinking of that is proof of economist Frederic Bastiat's theory of invisible consequences, as explained in "That Which is Seen, and That Which is Not Seen."

Hunter quotes from Bastiat's work, which explains how any action has immediate consequences (what is seen) but also consequences later on (what is unseen).

In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

The immediate effect will be new revenue to build city housing complexes, but the unseen effects will be loss of employee hours, wages, and possibly even their jobs because of the added cost. Indeed, if Amazon's spokesman's words indicate anything, the company may even not have a future in Seattle, which would take tens of thousands of jobs from the people there.

Will Seattle's city council wake up and smell the unseen consequences? Only time will tell.