They're swimming in progressive revenue bills over at the Seattle City Council now that Councilmember Teresa Mosqueda has introduced her own tax.
Now, the council will have to deliberate between Mosqueda's bill and the Amazon Tax legislation put forward by Councilmembers Kshama Sawant and Tammy Morales. While Mosqueda's tax borrows ideas from the Amazon Tax, it will raise less money and will impact fewer than the 800 or so businesses that would be taxed under the Sawant/Morales plan. It also already has support from big businesses that have a Seattle zip code.
Mosqueda's plan, dubbed "JumpStart Seattle," would raise around $200 million, significantly less than the $500 million the Sawant/Morales tax would collect. In 2020, the funds would be for COVID-19 relief investments in housing, food security, immigration and refugee services, and small businesses. After that, the bulk of the tax revenue would go toward housing.
That revenue would come from taxing businesses that have annual payrolls between $7 million and $1 billion. However, the biggest difference between the two plans is that JumpStart Seattle would tax only high-earning salaries—salaries over $150,000.
Companies in the $7 million to $1 billion payroll threshold would be taxed at a rate of 0.7 percent for employee payrolls over $150,000 (and at 1.4 percent for any salaries over $500,000). Then, there's a whole different tax rate for companies with payrolls over $1 billion. At those companies, employee payrolls over $150,000 would be taxed at a rate of 1.4 percent, and the over $500,000-earning paychecks would get slapped with a 2.1 percent tax rate.
But interestingly, the Employment Security Department did not provide data to council analysts about whether there even is a company in Seattle that fits that $1 billion tier. I mean, we can all assume that there is, but currently, there's a blank space for that tier, analysts said. So, projections for what the tax could generate don't factor in a company like, say, hypothetically, Amazon.
This is essentially a high-earners tax, like what was proposed in the state legislature earlier this year—which my colleague Rich Smith said sucked and would cost companies less than throwing a company holiday party.
But Mosqueda's tax goes further than that tax. The tax rate is higher, the yield greater. Nevertheless, it's still below Amazon Tax-levels.
Mosqueda said her tax "builds on the concept" that was started in Olympia. However, Mosqueda's tax includes a sunset clause stating it will expire in 10 years or it will expire once the county or the state implement similar progressive revenue measures.
The reasoning for pivoting from a blanket tax a la the Sawant/Morales Amazon Tax to the tax on high earners? "A post-COVID analysis," Mosqueda said. The idea was to allow businesses that were hurt by the COVID-19 crisis, that may have lost revenue or lost workers, to accrue revenue and reinvest in the economy. It also avoids taxing paychecks below $100,000 since those workers are more likely to be in the service industry, Mosqueda explained.
The concept was explained to me by John Burbank the executive director of the Economic Opportunity Institute in an interview back in April about the Sawant/Morales tax. Burbank is all for taxing high earners since there's no real societal good for such high employee compensation.
"I think that would be a pretty productive source of revenue," Burbank said. "It would also be one that is focused on equity and one that tracks corporate decision-making in terms of compensation."
Burbank continued: "Right now our system is a system of inequity. It is a system that reinforces privilege and the polarization of income and wealth in our city, our state, and our country. That’s especially true in Washington state because we have such a regressive tax system."
Taxing high income is a way to "level" income and wage disparity and signal that "we do not encourage the sort of privilege that is in fact tearing apart our society," Burbank said.
Companies like Expedia have already signaled their support of Mosqueda's plan. Expedia also supported the failed tax in Olympia this year. The only mention during Tuesday's press conference of the other progressive revenue tax considered by the council was from Steve Hooper of Ethan Stowell Restaurants.
"Other proposals that have been put out by other council members are massively regressive," Hooper said. "The greatest concern we had was that the payroll tax should not be impacting the jobs of the lowest wage options." Mosqueda's plan skirts that lowest wage threshold.
The tax wouldn't be collected until 2022 and companies would be considered for the tax based on their 2021 payrolls. But, the tax would start in 2020 with that sweet, sweet COVID-19 relief by borrowing from the city's emergency funds. The only hiccup there is that Mayor Jenny Durkan has mentioned potentially tapping those funds to fill a potential $300 million hole in the 2020 budget due to COVID-19. Durkan has not sent the council her budget proposal yet. It was due last week.
The other interesting thing is that it doesn't seem like Mosqueda or her team has talked with Amazon about this tax yet. When asked if she had, Mosqueda answered that she was interested in hearing feedback and that her "door is always open."