Seattle City Council members have proposed a new tax on large businesses that officials say will raise $75 million a year to fund affordable housing development and homelessness services.
Under the plan, which would come into effect in 2019, businesses grossing more than $20 million a year would pay .26 per hour for each employee. Only hours worked within the city would be taxed and the plan would exclude vacation and sick days.
Beginning in 2021, the employee hours tax would be phased out and replaced with a 0.7 percent payroll tax.
Seattle had a tax on employee hours last decade, but council members repealed it in 2009 after the financial collapse. The idea sprang back up during budget negotiations last year, when council member O’Brien and interim council member Kirsten Harris-Talley introduced a smaller tax on businesses that would’ve raised about $24 million.
The council voted 5-4 against the tax, with some opponents, notably Lorena González, saying it was rushed. Shortly thereafter, the council convened a task force to study potential progressive revenue sources.
That task force issued its recommendations earlier this year, which also called for raising $75 million figure through either an employee hours tax, a payroll tax, or a combination of both.
One major recommendation that did not make it through was a “skin in the game” fee for businesses that do not the revenue threshold. When council members met with business members, most spoke out against that idea. In a letter to council earlier this week, Mayor Jenny Durkan also urged council members not to pass a “skin in the game” fee.
In a statement, Mayor Jenny Durkan said through a spokesperson that she is "heartened" that the council did not include a "skin in the game" fee.
“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," said Stephanie Formas, a spokesperson for Durkan. "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.”
The plan would affect about three percent of businesses in Seattle, according to city officials. It’s sponsored by council members Lorena González, Lisa Herbold, Mike O’Brien and Teresa Mosqueda.
Nonprofits and businesses that already have business tax carve outs in state law would be exempt from the tax.
Most of the new revenue generated from the tax, about 75 percent, will go toward funding new affordable housing units. City officials estimate that the new revenue will add up to about 1,780 housing units over the next five years. About 20 percent will fund homelessness services.