In Seattle, which is a petri dish of progressivism, a prevailing theory is that when you raise the price of something, people will buy less of it, except when they do not. Another, and related, theory is that constitutional and statutory texts should be construed in the spirit of Friedrich Nietzsche: There are no facts, only interpretations.
The city council has voted to impose a tax, effective next year, on sugary soft drinks, raising the price of a 2-liter bottle of soda about $1.18. Presented as a public health measure to combat obesity, the tax is projected to generate about $15 million a year, although the aspiration of sin taxes should be zero revenues because chastened consumers will mend their benighted ways. Still, proponents of the tax are confident that it will make people behave better by consuming less of the disapproved drinks.
Three years ago, the city council, adhering to another tenet of progressivism, voted to increase the city’s minimum wage incrementally from $9.47 to $15 an hour. The council rejected the contention that when the price of entry-level labor increases, employers buy less of it.
The city commissioned a study from six University of Washington economists ranging from left to right, presumably expecting their findings to be congruent with other studies purporting to show that the demand for such labor, unlike the demand for sugary sodas, is price-inelastic.
The University of Washington study, however, published as a working paper by the National Bureau of Economic Research, concluded that the costs to low-wage Seattle workers have been three times larger than the benefits.
Using a richer trove of data and more sophisticated statistical methods than have been available for other studies of minimum wages, the report concluded that Seattle’s still-advancing increase has cost more than 5,000 jobs, and that workers whose wages were increased to comply with the new minimum lost an average of $125 a month as employers reduced their hours.
Although total employment in the restaurant industry did not decline, employers replaced less-skilled, low-productivity workers with others able to produce higher-value work products.
The city responded by seeking alternative facts. Forewarned about the six economists’ conclusions, it sought more congenial findings from some economists at the University of California, Berkeley, who are known for research that supports the agenda of the national “Fight for $15” movement. The Berkeley economists were so prompt that their findings were publicized before the University of Washington economists’ report was released.
Seattle’s city council is as undeterred by constitutional and statutory language as it is by social science. In July, it enacted a city income tax, setting the tax rate on incomes below $250,000 at zero and a 2.25 percent rate on individuals’ incomes above $250,000 and on household incomes above $500,000.
Washington, which has no state income tax, has a law that says: “A county, city or city-county shall not levy a tax on net income.”
In 2010, advocates of a progressive income tax submitted this for a referendum. It lost almost 2-to-1. It lost even in King County, home of Seattle and its Nietzschean city council.