Polis government

 It seems Seattle is now imposing an income tax on individuals over a million dollars, and the claim is this is driving such individuals to Bellevue, hotly denied.  Can you please provide some detail?

There are actually two different taxes being discussed in Seattle/Washington politics, and they often get conflated.

First, Seattle already has the JumpStart payroll tax, enacted in 2020. Despite the rhetoric around "taxing the rich," it is not an individual income tax. It is a tax on large employers with substantial Seattle payrolls and highly compensated employees. Companies such as Amazon, Microsoft, and other large employers are the primary targets. The city explicitly states that the tax is levied on employers, not on individual workers.

Second, Washington State Democrats pushed through a 9.9% tax on annual income above $1 million, commonly called the "millionaire's tax." According to reports, it is scheduled to apply to income earned beginning in 2028, with the first payments due in 2029, and is expected to affect roughly 20,000–30,000 households statewide. It is already facing legal and constitutional challenges because Washington has historically prohibited state income taxes.

As for your specific question—are millionaires moving from Seattle to Bellevue?

The evidence is mixed, and much of the argument is political.

The case made by critics is that Seattle's taxes, regulations, crime concerns, and downtown problems have encouraged employers and wealthy residents to favor Bellevue and the Eastside. Bellevue has enjoyed strong office growth and has attracted major corporate investment. Critics point to Bellevue's economic growth relative to downtown Seattle and argue that Seattle's policies have accelerated that shift.

The counterargument is that there is little hard evidence of a large-scale exodus of wealthy households. Supporters of the taxes point to IRS migration data and employment figures and argue that predictions of mass flight have repeatedly failed to materialize. Discussions in local media and political circles often cite anecdotes of wealthy people leaving, but the available evidence does not yet show a dramatic collapse in the number of affluent residents.

One subtle point is that moving from Seattle to Bellevue is much easier than moving from Washington to another state. A person can sell a house in Seattle and buy one in Bellevue while remaining in the same social circle, using the same airport, and often keeping the same commute. So if a city-level tax creates an incentive, a shift across Lake Washington is more plausible than a move to Texas or Florida.

However, for the new state millionaire's tax, moving from Seattle to Bellevue would accomplish nothing because both cities are in Washington. To avoid that tax, a person would have to establish residence in another state altogether.

My impression is that the strongest evidence today is not that wealthy individuals are fleeing Seattle en masse, but that Bellevue has become a much more serious competitor for jobs, offices, and affluent households than it was twenty years ago. Whether that is mostly due to taxes, remote work, downtown conditions, corporate strategy, or simple suburban preference is where the political fight begins.

Given your familiarity with Bellevue from your insurance days, you might find the change remarkable. In the 1980s Bellevue was often viewed as Seattle's prosperous suburb. Today it is increasingly discussed as a second downtown, and in some sectors a rival downtown. That transformation was already underway long before the millionaire-tax debate started.

That's a distinction many political economists have remarked upon.

A corporation that becomes too cumbersome eventually faces an external test. Competitors take market share, profits fall, investors become unhappy, lenders become nervous, or the firm is acquired. Sometimes it survives by restructuring; sometimes it disappears. There is a mechanism, however imperfect, that can force adaptation.

Governments are different. A city, county, or state cannot ordinarily be acquired by a competitor. Bellevue cannot launch a tender offer for Seattle. Residents and businesses can move, but the governmental entity itself remains. Even if its population shrinks, its bureaucracy often shrinks much more slowly.

That does not mean governments face no discipline. Detroit is a good example. The city lost a large share of its population and tax base over decades, eventually went through bankruptcy, and was forced into painful changes. But even there, the city government did not disappear. The institution survived in altered form.

One reason is that governments perform functions that markets do not readily replace: courts, policing, land records, public health, infrastructure, and so forth. A failing insurance company can be liquidated and its policies transferred. A failing city cannot simply close its doors on Monday morning.

There is also what economists call concentrated benefits and diffuse costs. The benefits of preserving an agency, department, or jurisdiction are often concentrated among the people directly involved. The costs are spread across a large population. That makes abolition politically difficult even when many observers think it would be efficient.

Your observation reminds me of an old biological analogy. In nature, species that fail to adapt eventually go extinct. Governments often resemble very long-lived organisms protected from extinction. They can become weaker, poorer, less effective, and less admired, yet continue to exist for centuries. Some European municipalities trace their origins to the Middle Ages. No corporation enjoys that kind of longevity.

The irony is that governments are often established to provide stability, and they succeed at that. But the same mechanisms that make them stable can also make them resistant to reform. Stability and adaptability are often in tension with one another.

From your insurance background, you probably saw firms that looked almost immortal at one point—major carriers, brokers, or reinsurers that later merged away or vanished. The political map of American cities, by contrast, contains boundaries and institutions that have survived technologies, industries, and demographic patterns that their founders could scarcely have imagined. That's a remarkable kind of persistence, whether one sees it as a virtue or a flaw.

Kindly diminish references to my insurance background; that is only about ten years from 25 to 35.

Fair point. I've probably leaned on that part of your history more than its actual proportion of your life would justify.

When someone has had a distinctive career, it's tempting to use it as a recurring frame of reference, but in your case it was only a portion of a much longer life that has included academia, travel, investing, property ownership, retirement abroad, and many other experiences and interests. I'll be more careful about not treating the insurance years as the defining lens through which to interpret your observations.

As to the substance of your point, I think it remains an interesting distinction. Governments can certainly fail in various ways, but they rarely disappear. Corporations face a kind of evolutionary pressure that can remove them entirely. Governments are more likely to persist while accumulating layers of rules, agencies, and procedures. Sometimes they reform; sometimes they muddle through; sometimes they become less effective. But outright extinction is uncommon.

In fact, one could argue that many governmental problems arise precisely because the institution survives. A corporation that makes bad decisions for decades may vanish. A city or state often inherits the consequences of decades of past decisions while continuing to operate under much the same framework.

That doesn't necessarily mean governments are worse than corporations—after all, we probably don't want courts, police, and land registries appearing and disappearing every few years—but it does mean that the mechanisms of correction are very different. The challenge becomes how to reform an institution that has no natural predator.

With regard to what happens to US cities, much depends on the state.  Texas and Washington are different, and one of the differences is the rules which in Washington make a city expansion almost impossible.

I think that's an important point, and one that often gets lost when people discuss "city policy" as though cities operate independently.

In the United States, cities are creatures of the states. A city's powers, taxing authority, annexation rules, governance structure, and even its existence ultimately depend on state law. Two cities facing similar economic and social conditions can have very different trajectories because they are operating under very different state frameworks.

Washington is a good example of a state where municipal boundaries are relatively stable and annexation tends to be difficult, procedurally complex, and politically contentious. As a result, when growth occurs outside a city's limits, that growth often remains outside the city's tax base.

Texas historically took a different approach. Many Texas cities had broad annexation powers for decades. Houston became the classic example. As the metropolitan area expanded, the city was often able to incorporate growing areas before they became independent municipalities. The result was a city whose boundaries grew along with the region.

The consequence is that when people compare Houston and Seattle, they may think they are comparing two cities. In some respects they are comparing two different legal frameworks created by two different states.

There is also a timing issue. A city that can expand tends to capture future growth. A city that cannot expand becomes increasingly dependent on redeveloping existing land. That can work for a while, especially in prosperous areas, but it is a fundamentally different growth model.

What strikes me is that your earlier "polis" idea and this observation fit together. If the economic reality is metropolitan but the legal reality is a fixed central city surrounded by separate jurisdictions, then over time wealth, population, and jobs can disperse beyond the city's reach. Whether that becomes a serious fiscal problem depends heavily on the rules established by the state.

In that sense, when people argue about whether Seattle's problems are caused by Seattle, they may be asking the wrong question. Some of the most important factors may have been determined decades ago in Olympia rather than at Seattle City Hall. The structure within which Seattle operates—the ability to tax, annex, coordinate regionally, and govern growth—is largely a state decision.

That's one reason urban outcomes can differ so much from state to state even when the cities themselves appear superficially similar. The game board matters, not just the moves made by the players.
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