News Feb 6, 2024 at 11:00 am

A Corporate Takeover and Some Millionaire’s Pet Project Won’t Stop House Our Neighbors' Quest for Progressive Revenue

HON's trying to fund the creation of groovy housing uninets that stay affordable forever. FRANK OKAY

Comments

1

Does anyone have the text of the initiative? A “5% payroll tax on businesses that pay employees more than $1 million/yr” could be interpreted more than one way. Is this on stock compensation? For each employee that makes over $1 million? Or whose annual payroll costs exceed $1 million? I have to think this new tax has got policymakers worried it will result in an exodus - especially for remote workers - of highly compensated individuals out of the city, imperiling the existing Jumpstart revenue.

2

Does anyone have a link to the text of the proposed initiative? Hannah omitted that, despite sticking over a dozen hyperlinks in this piece.

I ask because I am trying to square Hannah's characterization of the initiative as one that will "tax big business" with her subsequent description of the initiative as one that will create a "tax on businesses that pay employees more than $1 million per year."

Based on Hannah's "reporting," I can't tell whether this tax applies to business with a total payroll in excess of $1 million (which would affect a large number of businesses) or businesses that pay individual employees salaries in excess of $1 million annually (which would affect a small number of businesses and could likely be avoided without too much trouble).

3

In this day and age of remote work, seems like it would be fairly trivial to game the system and not pay this tax (but like @1 pointed out, we’ll need to see the text).

4

@1/2 they may not have filed the initiative yet which is why the text is not available. I have to think this is a tax on total payroll in excess of $1M and not on individuals who make more than $1M. The latter would be pretty limited and most executives who reach that level only do so because of stock compensation which is later taxed as capitol gains and not payroll. If that's the case it's a pretty wide net and its really not that hard for those personal services companies like financial planners that Hannah looks down upon to move to an office park outside city limits. It will be interesting to see how this plays out especially as Seattle has never refused a tax in recent memory even when they don't really work out (soda tax, ammunition tax, monorail)

5

If it’s a 5% tax on any business with a total
payroll over $1M it would be a staggering amount of money and a huge burden on the city’s business. (Including, for example, a restaurant chain that had more than about 50 minimum-wage employees). . It’s hard to believe that is what they really mean.

6

Also, I’m deeply suspicious of any initiative proponent who doesn’t give the press the actual text of their initiative. Hiding something in the quest for favorable coverage?

7

@1-5: Hannah’s tremendous lack of interest in providing the text of the initiative raises the usual red flags about the Stranger’s ‘reporting,’ but we always knew this initiative was coming, because I-135 created only a new housing bureaucracy, not any actual new housing. It appears this initiative may never create any new housing, either:

“…an estimated 1,700 to 2,500 newly built and acquired social housing units…”

So, HON may never actually build a single new residence. It may just buy existing residences, take them off the rental market, and reprice them according to their formula, reserving them to whomever HON sees fit. (This would also have the effect of raising rental prices on the remainder of the city’s housing stock, thus raising the dollar amounts of that sliding-scale 0-120% figure.)

8

I can’t find the text on HON’s website either. Wouldn’t you think they’d publish something this important and central to their mission?

9

"If successful, the measure would levy a 5% “excess compensation” tax on employer payroll expenses for each Seattle-based employee paid over $1 million in annual compensation. In other words, an employer would pay a 5% tax on any dollar over $1 million in total employee compensation. Total compensation includes base salary, stock and bonuses."

thanks, crosscut

10

https://crosscut.com/politics/2024/02/seattle-social-housing-advocates-want-excess-compensation-tax

is actually really informative and not just hundreds of words repeatedly calling the council bought by big business, or whatever the fuck is going on here

11

@9 thanks. So in reality it’s more like a CEO tax. I would think generally those are the only employees pulling down that coin. Would wonder how they calculate it. Is it actual paid comp or does it include valuation of equity in the formula.

12

The answer is in Crosscut as well

“If successful, the measure would levy a 5% “excess compensation” tax on employer payroll expenses for each Seattle-based employee paid over $1 million in annual compensation. In other words, an employer would pay a 5% tax on any dollar over $1 million in total employee compensation. Total compensation includes base salary, stock and bonuses.”

13

Thanks for the links, all! This doesn’t sound like the stablest of revenue streams since people making over $1M are likely to be small, and mobile. But it’s less likely to chase a bunch of jobs out of town (which could be low paying but en masse would exceed the $1M mark).

14

@9-10, Thanks!

That Crosscut article has a link to a press release from HON, which in turn has a link to the text of the proposed initiative. The text of the proposed initiative is available here: https://www.letsbuildsocialhousing.org/initiative-text

The gist is the tax is applicable to "persons engaging in business in Seattle" and amounts to 5% of any annual compensation to an individual employee that is in excess of $1 million. Excluded from the tax are independent contractors, and a handful of specific industries, as well as government jobs.

Super easy to game this tax with remote work or shifting highly-paid employees to a satellite office outside Seattle for a portion of their time: https://library.municode.com/wa/seattle/codes/municipal_code?nodeId=TIT5REFITA_SUBTITLE_IITA_CH5.38PAEXTA_5.38.025DECOPASEEM

I'm not sure how this will realize $52 million annually.

15

@14, Did they really have to exempt government jobs? La-ame. It probably only applies to a couple UW football coaches, but not loving the principle of that. Agree that the projection is optimistic. Thanks for posting the link to the actual text!

16

@10: Thank you and Crosscut for the link. And the expectations have already been lowered!

“The advocacy group estimates the public development authority would be able to acquire or build 2,000 units of housing over 10 years with that new tax revenue.”

So, we’ve gone from an estimate with a median of 2,100 units to 2,000, and expands on the idea of simply taking units off the market, instead of building new units:

“To start, House Our Neighbors expects the Seattle Social Housing Developer to use the tax funds for acquisitions instead of new construction. By buying existing apartment buildings, their hope is to get the new housing model up and running faster than going through the multi-year process of new construction. The Developer would likely begin working on new construction after four or five years.”

(I like the implication that buying anywhere near 1,000 existing units of housing won’t itself become a “multi-year process” in modern Seattle.)

17

Thanks @10 for actually providing some useful information (and thanks to Crosscut’s Josh Cohen for the informative article).

Sadly, this will be trivial to defeat / avoid (as I suspected). Really wish we would focus on ending the short term rental market - that alone will do more to decommodify housing than this proposal.

18

From the link @14: “The tax imposed by this Chapter is in addition to the payroll expense tax levied under Chapter 5.38.”

Chapter 5.38 is the “JumpStart Tax,” so, for employers who already pay the JumpStart Tax, this initiative would provide additional incentive to leave Seattle.

Bellevue would, no doubt, eagerly welcome all of those “wealth management and real estate companies that may not be large enough to pay into JumpStart but that still pay incredibly high salaries.”

19

Here's another fun legal question. Since the Social Housing strategy is to buy existing units to start (homes/condos) and then rent them out under the social housing contract are they bound by the same onerous regulations the city has set up for other landlords? They don't have an income proviso since it is not low income housing (just that you would pay x% of your income in rent) so would they have to accept the first applicant like everyone else and then be bound by the eviction moratoriums if they end up with a bad tenant? If that's the case this will be great to watch play out when inevitably progressive ideals once again collide with reality.

20

While we’re relying on the commenters to do the investigative work that TS should have done before publishing this piece, anyone know how many employees in Seattle actually earn over $1M?


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