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Tuesday, May 29, 2018

Backlash of America's Economically Forgotten-Seattle’s Plan to Tax Big Biz

Poor Man Survival
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Backlash of America's Economically Forgotten-Seattle’s Plan to Tax Big Biz
Seattle has transformed itself to one of the most liberal (or progressive, if you prefer that term) cities in America.
How liberal? The city of Seattle elected Kshama Sawant, an open Socialist, to its already very progressive City Council.
That City Council just passed a controversial “head” tax on big businesses — like (AMZN, Rated “B-”) and Starbucks (SBUX, Rated “B”) — to pay for the city’s growing homelessness and fund affordable housing programs.
The tax, which passed unanimously, will cost all Seattle-based businesses with more than $20 million in annual revenues an extra $275 per employee. The tax is projected to bring the city about $45 million of new annual revenue.
The plan proposes spending about two-thirds of the new revenue on affordable housing and the remaining on emergency shelter, sanitation, services for people living in their cars, medical services, and wage stabilization (whatever that is) for homelessness service providers.
Now, $45 million a year (of which Amazon is expected to pay about $10 million) is a lot of money. But a City Council-appointed task force puts the annual costs at $164 million to $214 million a year.
Note: Washington state does not have an income tax. In fact, its constitution prohibits taxing income or wealth, so this head tax is a clever way to bypass the income/wealth tax prohibition.
Opinions vary on the wisdom of this tax, but I see several negative consequences:
• Some people believe that large businesses should help pay for serious social problems, like homelessness. But thats not what big corporations are accustomed to. Heck, big corporations are accustomed to sticking their hands out for tax breaks, not extra taxes.
• A goal of government should be to encourage, not penalize, employment. Tax policy is pretty simple: Tax things you want to discourage and dont tax things that you want to encourage.
• Entry-level jobs will be the most affected. That $275 is peanuts compared to the salary of, say, a software programmer. But its more meaningful for a janitor or clerical worker. I forecast that big Seattle companies will outsource entry-level jobs to small, outside contractors who arent subject to the head tax.
Overall, Seattle real estate is getting so expensive that the average family let alone the poor and working poor are getting priced out of the market. [Just as it is in most parts of  ca and NYC}.
In Seattles King County, the annual household survival budget for a family of four in 2016 was nearly $85,000, which would require an hourly wage of $42.46. However, only 14% of jobs pay more than $40 an hour in Washington state.
And that is against a backdrop of extremely strong job growth. The national unemployment rate dropped to a prosperous 3.9% last month. But it dropped even lower in Washington to only 2.9%.
Despite those extremely strong jobs numbers, the American dream is slipping away for millions of Americans. A new study from the United Way found that more than 40% of U.S. households 34.7 million households cannot afford the basics of a middle-class lifestyle: Rent, transportation, child care and food
The number of what United Way calls the economically forgottenis growing despite the improving economy. This group lies between poverty and the middle class, and has been dubbed ALICEfamilies, for Asset-Limited, Income-Constrained, Employed.
When you add those 34.7 million ALICEhouseholds with people living in poverty, you get 51 million households. It's a magnitude of financial hardship that we haven't been able to capture until now.
Guess where the economically forgotten people live? The majority of these ALICEhouseholds live in Americas largest cities.
North Dakota has the smallest population of combined poor and ALICE families, at 32% of its households. The largest is 49%, in California, Hawaii and New Mexico. Frankly, 49% is shocking. That's almost half their population!
And this is happening at a time when corporate profits are soaring up by a staggering 26% on a year-over-year basis in the first quarter of this year and when the stock market has been enjoying a nine-year bull market run.
What does all this mean for investors? Social angst and economic frustration is getting worse and worse. Thats not a healthy situation for our country and paper assets.
You know all those reports about how lots of Americans can’t afford a $1000 surprise expense like a medical bill or a car repair? Well, forget additional expenses. It turns out that nearly half of the families in America are struggling to pay for food and rent. And that means that the economic collapse isn’t just “coming.” It’s HERE.

Bruce, the Poor Man, free thinker, social critic & cynic
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More Retirees Want a Side Gig. Here's How to Get One: Whether by choice of necessity, nearly three out of four Americans plan to work beyond traditional retirement age - at least on a part-time basis. CNBC.
Amazon Flex
Amazon is a titan of e-commerce and logistics. But they’re growing so fast that they can’t keep up with all the deliveries (608 million a day). Which is why they started Amazon Flex.
Amazon Flex enrolls the help of regular folks to deliver their extra packages. Depending on the state, this side gig pays $18–25 an hour.
You set your own schedule but you must have your own vehicle and pass a background check. You can get started right here.
Take up any of these side gigs and use the extra money you make to fortify your finances.
The online service Handy is a great way to earn some extra cash doing handyman work or cleaning. Depending on the task, you can earn anywhere up to $45 an hour.
You’ll determine your own availability and work schedule. And payment will be directly deposited into your account after each job. If that sounds up your alley, you can sign up right here.
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It's been nine years since the end of the Great Recession. The current economic expansion can't last. Take these steps to be ready to survive -- and thrive -- when it ends.

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Roberts said...

'Burn the rich'...the way of politicians [who are almost always among the rich] but in the end, it is the middle and lower class who wind up paying the bill. This is the way it works but everyone who passes such 'aren't we great' laws are too lame to realize the laws of unintended consequences.

Mary Ann said...

Yes, there really is a growing number of families that can't afford basics. I don't believe the economy is doing better either. It's a numbers game. They keep changing how they interpret the numbers to make things look better than they really are. They know the pitchforks are coming too!