Revenue Investment is a Key Component to Socially Just Climate Policy
Puget Sound Sage advocates for a strong carbon pricing policy that re-invests revenue from a carbon-pricing mechanism (whether it be a cap and trade or a carbon tax) into targeted communities that need it the most. A cap and trade or a carbon tax offer both upsides and downsides for the environment and equity, which you can learn more about here. In Sage’s opinion, the merits of each policy comes down to how well it is implemented and whether or not there is a targeted approach to supporting people of color and people with lower incomes.
A targeted investment approach would create massive opportunity to:
Identify which communities are the most in need
Target those investments to communities who are impacted first and worst by climate change and environmental degradation
We looked towards California’s policy SB 535 – which first commissioned a study to understand environmental hotspots in California. Based on the findings it then had community and policy experts work together to reinvest 25% of the revenue into smart investments that simultaneously address poverty and environmental challenges. This policy has resulted in the largest investment in environmental justice communities in the country. California has already moved millions of dollars to create green jobs, build affordable housing, build up transit centers and invest in clean trucks (which is vital for the health of communities living along heavily polluted truck routes).
How do we evaluate any carbon pricing policy? We start with equity and look towards investing in communities with the most need – but we should be clear about what equity means. This chart can be helpful to explain the difference.
Does Carbon WA’s proposal meet the equity measure?
Carbon WA’s proposal is to tax carbon and use the revenues to 1) reduce the sales tax by 1%, 2) give tax breaks to specific industries, and 3) put the rest towards funding a working families tax rebate. On the surface, this seems like good policy. But let’s examine their approach through a social justice lens.
Ultimately, the core concept to Carbon WA’s carbon tax proposal is “revenue neutrality,” where we greatly increase tax on one thing (carbon) but reduce taxes on other things (general sales). The problem with this is what the revenue neutral approach is about giving everyone the same via a tax reduction. Even at a 1% lower sales tax, this policy solution does not address the severe regressivity of our state’s tax policy – people with lower income pay more in taxes in Washington than any state in the country.
To their credit, Carbon WA included a portion of the revenue to the Working Families Tax Rebate a good policy similar to the Earned Income Tax Credit that gives working families larger refunds at tax return time. However, this solution does not take into account the fact that some communities live in closer proximity to environmental degradation and thus bear worse consequences. In addition, it leaves out large swaths of people with low incomes: specifically, people who lack documents to work in this country, single people, and people on fixed incomes.
For the future of our planet and for the people already experiencing the consequences of climate change, any policy must reduce carbon pollution. A successful and socially just policy will include revenue investments that create good jobs, prepare our region for climate change and incorporate the needs and input of communities of color and communities with lower incomes. We believe Carbon WA’s revenue neutral approach falls short of this measure.
A local urbanist, Owen Pickford, in a popular urbanist magazine literally called “The Urbanist,” recently published a call to urbanist action to support linkage fees. His article provides the strongest evidence yet that a linkage fee will build a better Seattle. Pickford methodically unpacks somewhat misleading arguments we’ve heard for a decade and half from big property owners and developers. He then calls on his fellow urbanists to heal their myopia and see the bigger picture:
“(w)e can remain the smallest voice in this debate. We can continue to conflate regulatory costs with housing limits. We can continue to ignore the problem of increasing land values. We can continue advocating only for policies that lead to displacement and segregation. We can expend our energy fighting against regulatory costs when we should be fighting for reduced housing limits. We can continue to use narratives that explain-away evidence rather than seeking to understand. We can continue to give people the perception that we are adversaries of affordable housing and integration by opposing a policy that evidence shows would be beneficial.”
What’s an urbanist?
Urbanism is defined by Miriam Webster as “a) the characteristic way of life of city dwellers, or b) the study of the physical needs of urban societies,” but is often understood as a movement for urban density, walkability, public transportation, and other modern urban “aesthetics.” Much appealing to the urbanist aesthetic is a value known as “vibrancy” which often goes hand-in-hand with the value of diversity, a.k.a. integration. However, the land-use and other policy decisions required to support both racial and economic diversity are often an afterthought, rather than a priority of decision-makers.
In our most recent op-ed, Puget Sound Sage also made the case for inclusionary housing programs by demonstrating a linkage fee will help prevent us from perpetuating land use patterns that perpetuate de facto segregation. De facto segregation is segregation inherited from a time of de jure segregation, like racial covenants or redlining. Linkage fees ask developers to set aside a small portion of new units as affordable or contribute to the city’s affordable housing fund. Because it would be applied broadly across the city, it requires only a modest contribution, but would become one of Seattle’s best tools to create affordable homes for low and moderate wage workers and families, because it would create new affordable housing within city limits, and mitigate the impacts of rising rents. Therefore, a linkage fee helps to prevent displacement, and contribute to the racial and economic diversity that both urbanists and social justice advocates hold dear.
The Growing Together Coalition, co-led by Puget Sound Sage and Housing Development Consortium, represents hundreds of individual signatories and over 50 organizational endorsers, including the some of the largest human service providers, faith, labor, housing, environmental, and social justice organizations in Seattle. All believe that the City of Seattle must pass an inclusionary housing program like the linkage fee, which would enable Seattle’s workers and their families to live near their jobs in the city.The Growing Together Coalition is pro-economic-growth, pro-density, pro-transit, pro-public investment, as well as pro-integration.
Pickford’s urbanism mirrors that of the Growing Together Coalition. Pickford highlights that linkage fee opponents have been detrimental to the plight of urbanists because they conflate height and density limits with regulatory costs like a linkage fee. He says this is a “mistake [that] has been detrimental to urbanists’ goals, creating an adversarial relationship between urbanists and affordable housing advocates. Furthermore, blurring the lines between housing limits and regulatory costs induces urbanists to overlook the most important factor in housing affordability: land values.”
In fact, Pickford’s article (which we will explain in layman’s terms in a separate post): 1) demonstrates that regulations like a linkage fee actually reduce land values, the increase of which contribute to our housing crisis for everyone, not just the extremely low-income; 2) provides evidence that linkage fees do not reduce supply of market-rate housing, but increase affordable housing production; and 3) calls on urbanists and social justice advocates to stand together because they ultimately share the same values.
This concept is not new – urbanists like Mike O’Brien, who sponsored the linkage fee legislation and others have long-supported social justice policies. If a linkage fee is not passed, the city would miss a significant opportunity to create thousands of permanently affordable homes where persons of color and people with lower incomes are experiencing displacement, like Southeast Seattle. This means that Seattle will not be “vibrant” or diverse, values that urbanists hold dear. In fact, demographic changes indicate that Seattle is becoming less diverse.
Last, Mayor Murray’s goals of creating 20,000 new affordable housing units in the next decade cannot be realized without a developer contribution program, even with the much needed renewal of the taxpayer supported Housing Levy. It is time to put to bed how linkage fees will end density as we know it, for good, if we want to live our values as urbanists and support economic growth, density and integration.
If you would like to stand with the 50+ organizational endorsers and individual petition signers in support of a linkage fee, visit our coalition website today!
With Seattle’s new minimum wage kicking in just two days, and tons of speculation about the impacts, I’d like to break down what it means for workers, businesses and our economy in some hard numbers.
What does Seattle’s minimum wage mean for workers?
Everyone in Seattle should be earning at least $11 per hour starting on April 1st. Depending on the type of business you work for, the compensation package may look different. If you work for a large employer (500+ employees) like Target, McDonalds or Amazon, your paycheck should reflect an hourly wage of $11 per hour. If you earn minimum wage ($9.47) today, then in two days you should earn $1.53 per hour more before taxes. If you work 32 hours a week and are paid every two weeks, your paycheck should show an increase of $91 before taxes. By December 31st 2015 you should have earned $1,836 more before taxes. That is enough money to buy a quality bed, put down a deposit on an apartment, or spend $10 on lunch three times a week for an entire year.
If you work for a smaller business (500 or less employees) your paycheck should reflect at least $10 in direct wages per hour, and $1 dollar in either tips or health care benefits. If you don’t get tips or healthcare benefits, you should be earning $11 per hour as your wage. So for example, if you are a tipped worker, your wages should reflect a $.53 cent increase AND your employer should show that you have earned least $1 in reported tips or they have contributed at least $1 per hour you worked towards a health care package. If you work 32 hours a week and are paid every two weeks, your paycheck should show an increase of at least $31 in pre-tax wages and at least $60 in compensation in the form of tips or healthcare benefits. By December 31st 2015 you should have earned $636 more before taxes.
What does Seattle’s minimum wage mean for the economy?
The University of Washington[i] estimates that nearly 37,900 people are currently earning minimum wage in the City of Seattle. As we’ve already estimated, each person will earn between $636 and $1,600 more this year if they work 32 hours per week until December 31st.[ii] If we look at the aggregate increase for all 37,900 workers earning minimum wage – minimum wage earners in Seattle could earn between $24 million and $69 million more in 2015 than they would have without a higher minimum wage. That represents a significant increase in buying power for Seattle’s lowest wages workers. That’s enough money to buy between 2.4 million and 6.9 million $10 lunches.
What does Seattle’s minimum wage mean for businesses?
Every business has a different model and labor costs can represent a different percentage of your total labor costs. The implications for restaurants have been dominant in the media, so we’ll explore what the implications are for a Seattle restaurant. Using the Washington Restaurant Association’s break estimates of a typical budget breakdown featured in the Seattle Magazine, we can get a sense of the total operating costs. According to Anthony Anton, CEO of the Washington Restaurant Association: 36% of funds are devoted to labor costs, 30% to food costs and 30% to everything else. These restaurants then operate on a 4% margin.[iii]
If we look at a $1 million dollar business, labor accounts for 360,000 of their total operating costs. Assuming all workers earn minimum wage (which means this estimate is looking at the largest possible increase to labor costs as the typical wage for cooks in our region is $11.27 per hour and the typical wage for dishwashers is $10.45 per hour)[iv] their labor costs should increase between 380,160 (if all workers are tipped) and 417,600 (if no workers are tipped). It’s safe to say that the total labor costs will be somewhere between those two numbers. Assuming 50% of work hours are tipped and 50% are non-tipped). The largest possible increase to labor costs for this business would be 398,880 – representing a 10.8% increase in labor costs. However, what is that increase compared to total operating costs? With a 10.8% increase in labor costs, total operating is no longer 1 million, but 1,038,880 – a 3.8% increase in total operating costs. A restaurateur could conceivably raise prices by 3.8% to make up the difference. For a $10 meal, that is a 38 cent increase. In short – in two days 38,000 people should see increases to their paychecks and some prices may marginally increase. By the end of the year – millions more dollars will have gone to the people who drive our economy – workers.
[ii] By comparing the number of FTE’s in Seattle (Employment Security Department Data) to the total number of jobs in Seattle (Puget Sound Regional Council Data) we were able to come up with a rough estimate of the typical hours worked for an employee in Seattle – 1600 hours per year or 32 hours per week.
[iv] According to 2014 occupational wage data at the Employment Security Department the median wage for cooks in the Seattle Metropolitan region is $11.27 per hour and the median wage for dishwashers is $10.45 an hour.