Seattle City Council Passes "Historic" Big Business Tax

by Chetanya Robinson

Seattle City Council passed a $214 million big business tax proposal Monday to address the damage of the COVID-19 pandemic, invest in affordable housing, and fund City services.

The 7-2 vote, a margin large enough to override a veto from Mayor Jenny Durkan, comes two years after the City Council passed and then walked back the Employee Hours Tax, or Head Tax, which would have raised $47 million per year for housing and homelessness services.

JumpStart Seattle, the new legislation introduced by Councilmember Teresa Mosqueda, will raise four times as much revenue.

"This is about caring for Seattlites now and into the future," said Mosqueda after the plan was passed. Mosqueda said the tax would help those most impacted by the COVID-19 pandemic and address the inequities the pandemic has laid bare.

The tax goes into effect in 2021 but will pay for immediate COVID-19 relief this year, investing $86 million dollars in housing and homelessness prevention, grants to small businesses and childcare providers, financial assistance for immigrants and refugees, and emergency grocery vouchers. This funding will be borrowed from City reserves and repaid with future tax revenue the next year.

In 2021, $86 million will be spent on City services that would otherwise be impacted by the budget shortfalls expected from the pandemic and to continue the COVID-19 relief from 2020.

Starting in 2022, the tax would raise around $214 million per year. City Council also passed a spending plan for the tax Monday, and while precise details will be hammered out in future meetings starting July 15, the plan is to fund affordable housing, Green New Deal investments, and community development projects.

The tax will expire after 20 years, the result of an amendment adopted Monday. Another adopted amendment passed 5-4, exempted some nonprofit healthcare providers from the tax.

Mosqueda's initial bill expired after ten years, but the amended version that passed the budget committee last week had this clause removed. Councilmember Andrew Lewis, who sponsored the amendment to "sunset" the tax in 20 years, said it would allow the City to transition to a regional progressive tax if the County or state passes one. Councilmember Dan Strauss said the 20-year sunset would be a time to reassess the tax and spending plan. Councilmember Kshama Sawant criticized this amendment, noting that it would end the tax without committing to renewing it. "Twenty years may sound like a long time for people who are not struggling to get by," she said.

The tax would charge the 800 wealthiest companies in the City, with payrolls of at least $7 million per year. The companies would pay for each employee making $150,000 a year or higher. Government employers, grocery stores, and nonprofit hospitals would be exempt.

Companies would be sorted into three tiers of taxation and would pay between 0.7 percent and 2.4 percent depending on their total payroll. At the lower tier, companies would pay 0.7 percent on compensation above $150,000 if their total payroll is between $7 million and $100 million and 1.7 percent on compensation above $400,000. Companies with payrolls between $100 million and $1 billion would pay slightly higher rates and companies with payrolls above $1 billion higher still.

Precise information about the highest tier companies with $1 billion or more in payroll was not provided to City Council analysts by the state Employment Security Department.

The three-tier approach, the result of an amendment from Mosqueda and Councilmember Tammy Morales last week, allows the tax to raise some $40 million more than its original version.

Mosqueda introduced the tax in mid-June as an alternative to a $500 million per year proposal first introduced by Sawant and Morales in the spring. The strategy of taxing companies for incomes above $150,000 per year was modeled on a progressive revenue proposal from the legislature, House Bill 2907, introduced by Rep. Nicole Macri, D-Seattle, that failed to pass.

All three proposals echoed the Head Tax of May 2018, which the City Council passed only to repeal in a 7—2 vote the following month. That tax proposal was led by Sawant, and Sawant and Mosqueda were the two council members who voted against the repeal.

Despite the fact that JumpStart Seattle raises less revenue than her $500 million per year proposal, Sawant praised the bill's passing.

"Now, Jeff Bezos and his billionaire friends are wishing they could call a do-over and have the modest 2018 tax back," said Sawant during the Monday meeting. "Every penny is needed, and far more in fact, to stop the racist gentrification, sky-high rents, and homelessness in this city."

For Sawant, the fact that the legislation dwarfs the Head Tax showed the power of social movements. "This is an absolutely historic victory for working people and for our movement," she said in an interview before the vote. "That gives me a lot of hope, that if we were able to do this here, then there's no question that there's a real movement that is willing to fight for big business taxes in other cities." A similar powerful movement could also pressure the state legislature to fix Washington's regressive tax structure, or, for that matter, defund the Seattle Police Department. "We have to use a similar sort of movement-building lens to see what could be achieved beyond this," Sawant said.

Sawant credited her Tax Amazon movement for applying pressure to the City Council by promising to send the tax to voters in November if the Council did not pass it.

For Morales, the tax is "a crucial step to embrace equity and reject corporate influence over our tax policies," and a challenge to state legislators to "invest in equity rather than austerity."

Councilmembers Debora Juarez and Alex Pederson voted against the tax, saying it should be decided by voters in November.

Pederson said he would support the part of the legislation that provides emergency COVID-19 relief in 2020, but not the tax plan itself, worrying that it would cause large employers to leave Seattle and cause ripple effects for small businesses. Without a detailed spending plan to consider, he worried City Council would be "taxing first, asking questions later." While supporting progressive revenue such as the effort in Olympia from Rep. Macri, Pederson was concerned about the size of the JumpStart Seattle tax and favored waiting to see what happens with the economy.

Juarez echoed this, saying that with a pandemic with no end in sight, and historic unemployment, she trusted voters to make the right decision. "We don't know what the economic landscape looks like."

Councilmember Lorena Gonzlez, who voted to repeal the Head Tax in 2018, said the COVID-19 pandemic has made it a more appropriate time for a big business tax. "I do think that the political winds have significantly changed across the city," she during the meeting. "Our constituents across the city want us to take action now."

Chetanya Robinson is a Seattle-based reporter.

Featured image sourced from the Seattle City Council Flickr account