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Seattle head tax would create 2,000 affordable housing units, council plan claims

Seventy-five percent of the money would be used to build nearly 2,000 units of affordable housing over the next five years.
Credit: maximkabb
(Credit: Thinkstock)

The Seattle City Council on Friday rolled out proposed legislation for a new Seattle business head tax and payroll tax.

The legislation, sponsored by councilmembers Lorena Gonzalez, Lisa Herbold, Mike O'Brien, and Teresa Mosqueda, would go into effect in 2019.

According to the council's central staff, it would collect $75 million in 2019. Seventy-five percent of the funds would be used to build nearly 2,000 units of affordable housing over the next five years. Twenty percent would be spent on homeless services, and the other five percent on "administrative costs."

Businesses with more than $20 million a year in taxable gross receipts would be impacted by the tax, the council says those businesses would pay an additional 26 cents per hour for each employee or $500 per employee a year.

In 2021, the employee hours tax would be phased out for a payroll tax. That tax will be 0.7 percent of the total payroll for "work done in Seattle." Non-profits are exempted from the legislation.

With the four sponsors and the likely support of council member Kshama Sawant, approval is a near-certainty. If one other council member was to approve the legislation, it would make the legislation veto-proof.

O'Brien, who asked for a smaller tax in last year's budget cycle, was pleased with the legislation discussed Friday. "Only the largest 2 or 3 percent of businesses will pay for this," he said. "We feel those companies that are benefiting most from that boom time we're having should help contribute to solving that problem."

However, the Downtown Seattle Association was quick to criticize the proposal. "More of the same, more taxing, more spending, I think we're going to get more of the same results, unfortunately, more people outside," said the DSA's Jon Scholes. "This plan is devoid of a real clear strategy, there's no meaningful investment in drug treatment and mental health treatment, there's no employment strategy to offer folks a second chance." Scholes went on to say, "If this was just about money we would have solved this long ago, cause the Council keeps spending more money, but we keep seeing worse results."

The Council claims that the tax will only impact roughly 500 employers, citing the Department of Finance and Administrative Services data. However, when contacted Friday, the FAS declined to offer up a list of those businesses, citing Seattle Municipal Code, and State Law.

Seattle Mayor Jenny Durkan, who earlier in the week expressed her reservations about the proposal, was unavailable for comment. Her spokesperson, Stephanie Formas said, "This is the first step of a legislative process. But it is good our small businesses’ voices were heard, and the Mayor is heartened to see this proposal does not impose a flat tax and exempts our small businesses who have recently seen significant increases to their taxes. Seattle small businesses are our largest employer, so it’s critical that the City protect our small businesses when considering any new business taxes or regulations.

“We need action that addresses both our homelessness crisis and protects our economy. In the upcoming days, the City Budget Office, City Attorney’s Office, and departments will be reviewing the details to determine how the proposed legislation and spending plan meet the priorities the Mayor communicated to Council.

“As Council begins deliberations on this proposal, it’s imperative that any legislation has full accountability and transparency for our taxpayers. We also have an obligation to show the public that our tax dollars are spent effectively. The Mayor looks forward to working with members of the City Council to continue to evaluate the policy framework, size, scope, budget, and impact of the proposed legislation as it moves through the legislative process.”

Council members scoffed at the question of whether businesses would move out of Seattle to avoid paying the extra tax. “Every single occasion – (they say) we're going to pack up our boxes and move away has been asserted,” said Gonzalez. Council Member Herbold added, “I'm not concerned about that - there is a reason why companies are based in Seattle - because it's a great place to do business.”

The council will formally introduce the legislation on Monday, with a final vote scheduled for May 14.

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