Council Members Mike OBrien and Kshama Sawant support a new tax on businesses to fund homelessness services.
Council Members Mike O'Brien and Kshama Sawant supported a new tax on businesses to fund homelessness services. City of Seattle

Seattle City Council members voted 5-4 today to remove a new tax to fund homelessness services from their proposed 2018 budget. The vote killed the latest effort to tax large businesses through a so-called "head tax."

More narrowly focused than an earlier proposal, the tax would have charged businesses grossing more than $10 million a year 6.5 cents per employee per hour. Supporters stressed that would have affected only the highest grossing 5 percent of businesses or 1,100 out of 70,000 total businesses in the city. The money raised would have funded homelessness services and affordable housing. Council members say that would raise about $20 million a year. The tax would have taken effect in 2019, but the plan called for the city to borrow money now to fund services next year and then pay the loan back with tax revenues starting in 2019.

Council Members Lisa Herbold, Mike O'Brien, Kshama Sawant, and Kirsten Harris-Talley voted for the tax. Council Members Debora Juarez, Sally Bagshaw, Lorena González, Rob Johnson, Bruce Harrell voted against it.

Supporting council members linked Seattle's explosive growth to its homelessness and housing crisis. "The growth has not only not helped everybody, but the growth has hurt people," Herbold said.

Harris-Talley, a temporary member who was appointed to replace now-mayor Tim Burgess until later this month, called on her colleagues to "elevate your values today."

"We have a unique opportunity right now with the makeup of this dais to walk our talk and make this decision," Harris-Talley said. Harris-Talley said she received "three-to-one" public feedback in support of the tax. She pledged to return to council chambers after incoming council member Teresa Mosqueda is sworn in on November 28. "There's going to be a new council and we're going to show them twice as much of what community has to say," Harris-Talley said.

Two years ago, the City of Seattle and King County declared states of emergency on homelessness. "I do not want to be in a position a year from now where it's actually worse after three years," O'Brien said.

The council members who voted against the tax all said they either supported a head tax or expected one to come forward later regardless of today's vote. Council members opposing the tax said it was rushed and questioned the lack of involvement of businesses who would pay the tax.

"My concern about a head tax is we have not brought in that 1,100 businesses that people dismiss and say they can pay for it," Bagshaw said.

González and Juarez questioned the plans for how to spend the money, saying they hadn't received enough specific information about how many people would be housed with programs funded by the tax. González, Juarez, Bagshaw, and Harrell all pledged to support a head tax in the future. Juarez promised a "30-day" process. Bagshaw said Mayor-Elect Jenny Durkan has committed to a "conversation that will move in the next 90 days." González said if a head tax has not been passed by March, she will propose one that raises even more than the one considered today.

As an alternative to the head tax, Harrell proposes taking about $8 million from the city's rainy day fund to pay for increased homelessness services and housing next year.*

As council members said they would vote against the tax, Sawant slammed them as part of "corporate politics."

"I have no intention of punting to someone like Jenny Durkan, who has stated very clearly which side she is on," Sawant said.

González shook her head as Sawant spoke. Juarez later said she didn't meet with businesses that opposed the tax. "I'm not in a back room smoking cigars and cutting deals," she said. Both Sawant and González said they plan to introduce resolutions expressing council members' support for (or at least plans to consider) a head tax.

Herbold, who supported the tax, also chairs the council's budget committee. She included the tax in the so-called "balancing package." That package contained millions of dollars in money for social services and housing programs expected to be funded by the tax. With the tax removed from the budget, council members will now have to identify other funding sources or allow those programs to go unfunded.

UPDATE: The council voted 5-4 against borrowing money from the rainy day fund for homelessness. That leaves their budget without a significant new source of money for homelessness. In pitching the rainy day fund plan, Harrell cited the urgency of the homelessness crisis. He argued borrowing from the fund would keep pressure on the council to find a new source (like a head tax) to pay that money back next year. But the four council members who supported the head tax all voted against the rainy day fund idea, saying it was fiscally irresponsible. That’s despite the fact that some of them, including Sawant, have supported borrowing from the fund in the past. Sawant called today’s proposal an attempt to “deflect the push from the movement to tax big businesses.” The council is now left in a bind: They have a long list of programs they proposed funding with the new head tax. But with neither that money nor new money from the rainy day fund, they’ll have to decide what goes without funding. They’ll reconvene for more budget talk tomorrow at 9:30 am.