Should the owner of this $15 million Seattle mansion pay a luxury tax? | KUOW News and Information

Should the owner of this $15 million Seattle mansion pay a luxury tax?

Sep 20, 2017

The Sam Hill mansion on Capitol Hill is the most expensive real estate listing in Seattle.

Should the owner have to pay a luxury sales tax? It's one of the big proposals in this year's Seattle mayor's race.

This particular mansion was built in the early 1900s for railroad tycoon Sam Hill, who also built the Peace Arch on the Canadian Border and a full scale replica of Stonehenge out in eastern Washington.

The concrete Seattle mansion has five bedrooms, six and a half baths, a wet bar and a wine cellar.

While the building is a symbol of Seattle's entrepreneurial past, it's also symbol of opulence in a city where Amazon is king and housing affordability has become the hot button issue in the Seattle mayor's race.

In contrast to the owners of luxury homes like this one, around one in three Seattle-area residents now spend more than half their income on rent, according to a recent report by Zillow.

"Housing in Seattle has just become too expensive,” said Jenny Durkan, the mayoral candidate and former U.S. attorney. “In too many ways and for too many people, our incredible successes are also creating two Seattles."

Her opponent in the race — urban planner Cary Moon — has also made housing affordability her top issue. And one proposal Moon has been talking about on the stump is a luxury real estate tax.

"It would generate revenue that we could then spend on affordable housing, which we all know we need a lot more of,” Moon said.

It would also make the city's tax system somewhat less regressive in a state where any income tax is a non-starter — at least for now.

The details of Moon's real estate tax proposal are to be determined, she said, but properties that go for much over a million dollars would likely qualify for the tax of a 1/4 percentage point, paid by the seller.

Moon's opponent in the race - Jenny Durkan - says she also supports a real estate tax on all luxury sales.

Back on Capitol Hill, Oscar Noguera walked two dogs past the Sam Hill house. He said a luxury tax is a terrible idea: "It doesn't sound fair to me. Just because you are successful doesn't mean that you are supposed to be paying more."

Across the street, Thomas Williams disagreed. "Luxury real estate? Of course. And especially if it's not necessarily something that they need — it's just luxury? Then of course!"

But, there’s a problem behind promises of a luxury real estate tax: Seattle doesn't have the power to implement it.  

"Because of the state constitution, the state has ultimate control over how we tax our citizens, and so we need to get permission from the state,” said Robin Koskey with the city's Office of Housing.

The city has asked state lawmakers to allow for a similar tax, but the proposal failed to get out of committee.

So the luxury real estate tax is one of the many promises voters will hear about in this year's Seattle mayor's race. But for now, it won't happen because the city's hands are tied.

And the seller of this $15 million mansion won't pay anything extra to support affordable housing.

Correction, 5:30 p.m., 9/19/2017: A small state income tax would be legal under Washington law, according to one analysis. An earlier version of this story implied otherwise.