I’m going to vote “Yes” on Initiative 732, a proposal to impose a tax on carbon emissions, sale or use of certain fossil fuels, and fossil-fuel-generated electricity. I’ve written and said before that taxation serves three ends, raising revenue for public benefits, encouraging behavior that is beneficial and discouraging behaviors that are detrimental, and redistributing money (call it the Valdez Doctrine). Taxes and debt when used skillfully can steer the economy, shortening downturns and making the good economic times last. I think Initiative 732 is a tax program that does all three of these things well. But this post isn’t about Initiative 732, it’s about why Initiative 732 has split the left in Washington state and what that split tells us about housing policy in Seattle.

Initiative 732 has been plagued with controversy from its inception. If you support more housing supply as the solution to housing price issues in Seattle, there are two important articles about Initiative 732 that you simply must read. The first, in Vox, “The Left Vs. a Carbon Tax,” traces the wending path of division within the progressive left over Initiative 732. The second, “Weighing the Critiques of Carbon WA’s Initiative 732,” by the Sightline Institute follows that path but judiciously tracks the policy underneath the politics. That analysis concludes, correctly, that the division over Initiative 732 has three components:

• Cap or tax? Should we use a cap or a tax to make polluters pay for each ton of pollution?
• Who should have power in the process? Should communities of color and low-income communities have seats at the table when a policy is being formulated and when it is being implemented?
• What to do with the revenue? Should we invest polluters-pay revenue in clean energy, disadvantaged and frontline communities, and worker transition? Or should the proceeds flow back to people and businesses as cash?

Roughly speaking, these same three fissures are the same ones creating a maddening divide among a broadly left tilting group of people who talk about housing in Seattle. Here’s how they translate in the housing discussion:

• More supply or more subsidies? Should we be charging for-profit producers of housing to generate subsidies for non-profit producers?
• Who has the power in the process, the people who actually take financial risks to produce housing, or people that live in it?
• Who gets the money? Should organizations that claim to represent people of color, unions, and other social justice groups be able to collect funding to fuel the operations of their organizations and deliver subsidies or money to their members?

What’s the problem with the housing discussion in Seattle? We know that housing is built, mostly, by for profit builders and paid for, mostly, by people with cash or credit. This is the housing market in Seattle, and since price is an indicator of how the supply of housing is meeting the growing demand, we also know that as prices go up, the increase is an indicator that we don’t have enough supply. Our problem is housing scarcity. So far so good, right?

The logical and economically appropriate thing for everyone in Seattle to rally around would be a comprehensive approach to housing that would

• Tax consumption of land for housing, so if you eat lots of land (single-family), you pay more, eat less (multifamily), you pay less;
• Take any revenues generated by the taxation of land use would be used to offset the costs of living for people who earn very little and struggle to make ends meet in our community; and
• Remove barriers to entering the market for housing producers, reduce costs of production, and eliminate the thicket of rules, regulations, and red herring design review and parking requirements that slow and raise the costs of housing production and enhance and defend single-family home values.

Instead, what most of those people working on the housing policy discussion are supporting is Mandatory Inclusionary Zoning (MIZ) which ignores price as a measure of supply and demand, and settles instead for a modest boost in production of inclusionary subsidized housing and fees for non-profit housing producers.

That takes us back to the three fissures. For some reason, there is a stubborn resistance to following the logical path because “politics.” What are the politics? The non-profit housing producers combined with various organizations claiming social justice status and representation of people of color want more money; more money for operations of their organizations and more money for programs that address the narrow needs of their constituencies. 

Playing off the conventional view that developers make a lot of profits from the development and construction of housing, these groups have pushed for a tax on the production of housing, a tax that would do the opposite of what is needed to affect prices of housing in Seattle by adding costs and slowing production. And these groups have adopted a bizarre but self-serving economic theory that holds that building more housing makes it more expensive because the new units created luxury units that destroy existing affordable housing and displace poor people. This view has been debunked again, and again by data, economics, and math.

And as if it wasn’t enough to simply wring cash out of the market and raise prices, the progressive left is also putting up barriers and limits to investment in communities that need it the most, those with people with lower incomes, lots of new immigrants, and old energy efficient housing. Councilmember Herbold and O’Brien have succeeded in essentially red lining huge swaths of Seattle by adding costs and fees to those areas in the name of protecting people from displacement, something they have no adequate measure for.

The vast majority of Seattle residents unfortunately, share this view of housing economics: Poor people and people of color are being hurt and displaced as developers race to create housing to boost their profits. Playing off this view, the non-profits have demanded that any housing solution “empower” poor people and people of color. How do they propose to do that? Tax, fee, and regulate the production of market rate housing, and give those fees to the non-profits and social justice groups. It’s notable that they haven’t been loudly in favor of redistributive ideas like guaranteed basic income.

Like Initiative 732, many on the left simply can’t follow the math when groups are leveraging the deeply held progressive value of inclusion and, frankly, the guilt many of them have over past sins committed by the dominant white culture. So instead of moving forward with measures that we know will have a positive impact on prices and on climate, the left starts to argue with itself. How do we both do what data indicate while also meeting the deeply held view that some groups deserve something, dollars, from the solution?

So what should be an enthusiastic embrace of a data driven proposal to reduce climate change ends up in a fight about who was at the table, and what is an obvious solution to rising housing prices, build more housing, ends up as an extortionary policy that will actually increase housing prices for everyone.

Unfortunately, I don’t see this problem going away anytime soon. If anything, it’s getting worse. The drift in national and local politics is markedly Jeffersonian-Jacksonian, vilifying business, corporations, anyone who is an expert, and at the same time confusing efforts by some organizations wanting more for themselves with real inclusion and outreach to underrepresented and disproportionately poor communities.

And many, many locals in Seattle have been padding their own political and financial nests, trying to be as “inclusive” as possible and embracing economic ideas that are antithetical to our long-term best interests. The financial benefits of paying off the opposition and the political largess of being willing to “bring everyone together” are simply irresistible to large developers and wannabe elected officials.

The hang-ups with Initiative 732 and our effort to create an economically and environmentally sustainable housing solution are self-imposed. It doesn’t need to be this way. What’s the solution? I’ll offer one in the next post.