In a press conference Tuesday, House Our Neighbors! (HON) launched a citywide ballot initiative to create a new progressive tax to permanently fund the social housing Public Development Authority that voters approved in a February 2023 ballot measure.
If HON can collect at least 26,520 signatures within 180 days, then voters will decide whether or not to tax big business for more housing this November. With turnout at its highest due to the presidential race on the ballot, the success of their initiative, particularly next to initiatives that repeal taxes on the ultra-wealthy at the state level, could put to rest the debate about voter sentiment on progressive taxation verses austerity budgeting, the City’s most pressing, existential question in the face of a quarter-billion-dollar shortfall next year.
JumpStart’s Hot Younger Sister
In the 2024 City budget, the City of Seattle failed to establish a permanent, ongoing funding source for the PDA, contributing only the legally required start-up costs. Seeing that the previous council couldn’t muster the political will to find the money for social housing, HON Policy & Advocacy Director Tiffani McCoy said her organization didn’t want to waste the time lobbying the new, more conservative council.
Motivated to see its project through, HON will put the question to voters with an initiative that imposes a 5% payroll tax on businesses that pay employees more than $1 million per year. The tax would start collecting in 2025, and HON estimates it would raise $52 million per year. That money would pay for an estimated 1,700 to 2,500 newly built and acquired social housing units, ranging from studio to three-bedroom, for tenants making between 0-120% of the area median income (AMI), with rent priced at 30% of their income. HON’s estimates do not include any bonding or state or federal funds, which would pay for even more units.
Does a payroll tax sound familiar? If so, that’s probably because in 2020 the Seattle City Council passed “JumpStart,” a payroll expense tax that charges the very largest businesses–those that spend at least $7 million on payroll–between 0.7% and 2.4% on salaries of employees who make more than $150,000 per year. HON’s Social Housing payroll tax would not take any revenue from JumpStart, making good on the campaign’s initial promise not to take from existing funds for affordable housing.
While both JumpStart and this social housing payroll tax would hit some big businesses (sorry, Amazon), McCoy said that HON’s tax would touch some sectors that JumpStart does not. For example, JumpStart exempts grocery stores, and HON’s tax would not. HON’s tax, McCoy said, would also draw revenue from wealth management and real estate companies that may not be large enough to pay into JumpStart but that still pay incredibly high salaries.
Though HON’s proposal builds off the scaffolding of the court-tested JumpStart, which may offer some peace of mind to politically anxious observers worried about the tax standing up to legal challenges, opponents will likely subject it to perpetual political attacks anyway, just as they do with JumpStart.
Since its inception, Mayors have tried to raid JumpStart funds–which the Council earmarked specifically for affordable housing, green new deal projects, and economic development–to pay for their own priorities. And now it would seem as if big business wants to direct their newly bought city council to permanently funnel JumpStart dollars into the general fund, defunding those important programs to fill the huge budget hole.
Luckily for HON, under City law, their tax would be safe from any of that kind of fuckery for two years after its passage. Whew.
The State of Play
But before I get too ahead of myself, McCoy anticipates a strong, well-funded opposition campaign to this measure. HON raised more than $300,000 for its last campaign, but their enemies have richer, eviler donors who could bury them. After all, big business and real estate just poured more than $1 million into buying a council that would oppose taxation.
Many of those new electeds told Real Change News they support funding the PDA. Council Members Tanya Woo, Tammy Morales, Joy Hollingsworth, Maritza Rivera (kinda), and Cathy Moore all said “yes,” the City should pay more into the PDA. Council Members Rob Saka and Dan Strauss said “maybe,” and Council Member Bob Kettle did not attend the interview.
Still, duty-bound to their anti-tax donors, some council members could misuse HON’s campaign as an excuse not to pass other new progressive revenue to fill the budget hole. To be clear, the council would be hugely misguided in doing that, since HON’s money funds the PDA specifically. But with Council President Sara Nelson at the wheel, fuckery should be expected.
Plus, right-wing multi-millionaire Brian Heywood put state-level progressive revenue on the chopping block this election with an initiative to repeal the capital gains tax. His villainy scared the previous city council out of passing new progressive revenue last year, and it’s also helping to stop the Democrats in the State Legislature from doing much of anything this session.
Even with all those external factors in mind, McCoy said she’s not nervous about it. She knows her team can pull off a winning ground game. She knows Seattle supports social housing. And she knows the housing crisis won’t wait for Heywood or big business to have a sudden change of heart.
“We can’t wait for a more opportune time to pass this,” McCoy said.
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.
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).
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).
@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)
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.
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?
@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.)
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 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.
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.”
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).
@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.
@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!
@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.)
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.
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.”
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.
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?