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Seattle Exodus

Published December 15, 2020

Texas appears to be an alluring destination. The Tax Foundation reports that California has the second largest state tax burden on its economy. Texas is among the ten states with the lowest total tax burden. Indeed, the U.S. Census Bureau predicts that Texas will pick up three Congressional seats after the 2020 census. California is projected to lose one seat.

Cities are not immune. An analysis by the American Enterprise Institute (AEI) found that the population among the least dense ZIP codes across the U.S. grew at almost twice the rate of the densest ZIP codes. Samsara, a leading transportation technology company in San Francisco, examined national data on commercial transportation this year and found that routes to and from larger cities declined by 50% more than routes in smaller cities.

Seattle is no exception. The Seattle Times found that mail-forwarding requests to the U.S. Postal Service in King County jumped 30% in the first half of 2020, compared to the same period in 2019. This appears to be more than just a summer COVID escape. In August, Seattle’s Budget Office had to revise its June tax revenues forecast for 2020 even further downward, and revenue projections are expected to continue declining for 2021.

What might be pushing this apparent exodus of jobs and people from the Emerald City?

Changes in the quality of life: Radical protesters seized and maintained a six-block area of the city for an entire month this summer. The initial implicit support by city government slowly evolved into an inability to re-establish law and order in the zone. Armed men protected looters and prevented police and EMTs from assisting crime victims within the zone. In general, violent crime across the entire city increased. For example, the Seattle Police Department reported that murders across King County in 2020 are 67% higher than last year, and a 78% increase over the previous five-year average.

Changes in the business environment: Seattle’s minimum wage has increased to be among the highest in the nation, roughly equal to San Francisco and New York City. A University of Washington study found that total payroll expenditures on minimum wage jobs has subsequently decreased. Seattle’s tax burden on business will also soon increase. The new “Jump Start” jobs tax is based on an employer’s total wage bill—the more employees on the payroll (or the more employees are paid), the higher the tax.

It may be time for Seattle government to pursue a different post-COVID strategy.

Eric Knowles, MBA

The Knowles Group has been providing professional economic services to the legal community since 1979. The firm has worked on behalf of thousands of attorneys in a dozen states and Canada. Testimony has been provided in both federal and state venues.