Seattle City Council Weighs Dueling Payroll Tax Plans

Charles Woodman

SEATTLE, WA — Seattle City Council is considering two competing proposals for payroll taxes on the city's largest businesses.

Both proposals would help provide for social services and emergency services for residents struggling amid the pandemic, but they vary substantially in how much money they would raise and how they would be implemented. And both rest in the long shadow cast by the 2018 head tax, which was passed unanimously by council members but repealed less than a month later after massive outcry from businesses.

The Amazon Tax

The first tax, proposed months ago but tabled for the immediate coronavirus response, is a payroll tax of 1.3 percent on Seattle's biggest businesses. The tax, proposed by councilmembers Sawant and Morales, is often called the "Amazon Tax" and would raise up to $500 million dollars each year. If approved, this year $200 million of that money would be put towards coronavirus relief stimulus checks for struggling families. Under this proposal, the tax would only affect businesses with annual payrolls larger than $7 million dollars which, according to Sawant's office, is only 3 percent of Seattle businesses. The remaining 97 percent would be exempt, as would non-profits, public employers and grocery stores.

Under this plan, the new taxes would not be due until 2021 or 2022, and the $200 million in emergency spending for this year would be paid through an interfund loan.

Jump Start Seattle

At Seattle City Councils's Select Budget Committee Wednesday a competing payroll tax was introduced by councilmember Teresa Mosqueda. Mosqueda's plan, called "Jump Start Seattle" would impose a smaller, .7 percent tax on large businesses with payrolls between $7 million and $1 billion, and a 1.4 percent tax on companies with payrolls greater than one billion. The taxes would also increase for the payrolls of employees who make over $500,000 annually.

(Seattle City Council)
(Seattle City Council)

All together, the program would raise an estimated $174 million annually.

The Jump Start Seattle tax would be effective starting next year with the first payments due in the final quarterly payment of 2021.

If implemented, $86 million would immediately be given for coronavirus relief for small businesses, immigrants and refugee support programs, housing and food security. That money would then be replenished by the Jump Start Seattle tax next year.

The remaining $88 million raised in 2021 would be split as follows:

  • $65 million for continuing emergency services

  • $17 million for COVID-19 relief programs funded in 2020

  • $4 million for administration costs.

After 2021 the money would then be split between affordable housing investments, equitable development, and supporting local businesses.

Debating the differences

The obvious difference between the two is that Jump Start Seattle would raise some $300 million less for emergency funds and social services, which has drawn it some criticism as a "half-measure" compared to Sawant and Morales' more robust proposal.

"That is a big difference, and given the scope of the housing affordability crisis, I just don't understand why we should accept this much lower number," said Sawant.

Another sticking point is that Mosqueda's plan includes a sunset provision, meaning the tax would expire in 10 years time, or if another progressive taxing plan was passed at the state or county level.

Several supporters of Sawant and Morales' plan gave public comments before Wednesday's meeting asking for the rejection of the sunset provision saying Seattle needed a more permanent progressive taxing solution.

Others did not see it that way, including councilmember Lisa Herbold, who said that 10 years would be plenty of time for the city to reassess the tax.

"If the state fails to act over the next 10 years to correct our upside down tax code, the city council would very likely act to block the tax code because we will still have the same challenges we have now," said Herbold.

Despite the major differences in their approaches to a payroll tax, both councilmembers Sawant and Mosqueda recognized they were fighting for a similar goal, and one that had seemed almost impossible after the head tax debacle in 2018.

"Look at the conversation we are having, it is completely on a different magnitude of revenues than the one that got repealed in 2018, that shows the pressure on big business," said Sawant.

Both proposals will be discussed again at next Wednesday's Select Budget Committee.

Related stories:

Updated 'Tax Amazon' Plan Includes $200M For Coronavirus Relief

Decapitated: Seattle's 'Amazon' Head Tax Killed By Council

This article originally appeared on the Seattle Patch