Not to count our chickens before they hatch, but Seattle is poised to actually follow through on a progressive revenue option. Or three. As long as the council doesn't, for the love of god, pull some of that 2018 head tax nonsense.
There are multiple tax options that the Seattle City Council is considering: Councilmembers Kshama Sawant's and Tammy Morales' Tax Amazon package or Councilmember Teresa Mosqueda's JumpStart Seattle plan. And, it looks like Councilmember Andrew Lewis just introduced a capital gains tax proposal:
1/ We live in a time of enormous inequity and our regressive tax system isn't helping. That's why I am introducing a new 1% tax on capital gains. Let me tell you a bit about it.. pic.twitter.com/XpwlZgOUnY
— Councilmember Andrew J. Lewis (@CMAndrewJLewis) June 18, 2020
There's an economic disaster looming for Seattle—and Washington state as a whole—with city budget holes estimated in the $300 million range, state budget shortfalls nearing $9 billion, millions still unemployed, and COVID-19 still at large. There has to be a solution and the Seattle City Council will be damned if they don't figure it out. Cue: all these progressive revenue proposals.
Sawant's and Morales' payroll tax would raise $500 million and Mosqueda's payroll tax would raise around $200 million. Lewis' capital gains tax is estimated to raise around $36 million by taxing capital gains at 1 percent so as to fit within a Washington State Supreme Court ruling that allows income to be taxed like property (it's considered "intangible property") and follow the same rules as property taxes.
"It doesn’t raise a colossal amount of money," Lewis lamented to me. He says he's constrained by the law, though he fully anticipates a legal challenge if the capital gains tax passes "by the same plaintiffs that went after the income tax and who always oppose progressive taxations."
Lewis has left out retirement funds and real estate sales from his proposal. It would essentially tax only stocks and bonds.
John Burbank, the executive director at the Economic Opportunity Institute, said that "the exclusion of real estate may also create a legal challenge because according to the constitution, a tax must be uniform across a class." In this case, that class is income and it would have to be uniform across all forms of income, real estate included.
"That would be an interesting legal development and discussion," Burbank said, "but I don’t think it’s necessarily a slam dunk for Andrew's proposed ordinance."
But, Burbank thinks the proposal is a good idea, especially if it's a compliment to the payroll taxes already on the table. Lewis said that that's absolutely his intention.
"We could theoretically pass all three of these," Lewis said. However, he's leaning more toward Mosqueda's plan. So, it seems, are many of his colleagues.
While the Tax Amazon package is more aggressive and will raise more money for COVID-19 relief and housing, it's looking like it will have a hard time getting approval from the rest of the council, especially after they got the lowdown on Mosqueda's bill on Wednesday. After the presentation, Council President Lorena González announced she was signing on as a co-sponsor of Mosqueda's bill. Lewis announced on Thursday he would be as well.
The main difference of the bill is that Tax Amazon will implement a 0.7 percent payroll tax on all businesses that report $7 million or more in annual payroll. Mosqueda's JumpStart Seattle tax will tax companies who report that much in annual payroll but will only tax the paychecks of high-earners (over $150,000) and at different rates.
Councilmember Lisa Herbold seemed keener on the Mosqueda bill than she had been on the Tax Amazon package. One of her biggest reservations was how businesses impacted by COVID-19—with 2020 payrolls that would not mirror the 2019 payrolls the tax would be based on—would fare under the tax. Herbold says that worry doesn't exist with Mosqueda's high-earners tax. Herbold would, however, like the tax to start in 2020. Currently, it would only start in 2021.
It's unclear where the rest of the council stands, especially with Lewis' new tax. Who knows! Maybe everyone will have introduced their own plan by this time next week. If that's the case, pour one out for your city council reporters.
"The conversation will be easier now that there is another vocal supporter of the idea of taxing big business," Morales told me. While she said she didn't "suffer any illusions" that getting the rest of the council on board with her and Sawant's plan would "be easy," she expects more people to come along.
After all, everyone on the council now who was on it in 2018 voted for the head tax. Before most of them voted to repeal the head tax, of course.
"I do want to acknowledge the work that Councilmember Mosqueda did," Morales said. "She’s a calming presence on the council," Morales laughed. "That is certainly going to be helpful in getting more councilmembers to support the idea of taxing big business."
And, another thing to remember, there's an additional card up the Tax Amazon sleeve: a ballot measure. Back in January, Sawant announced she was introducing a payroll tax package in the city council and concurrently introducing the same package as a ballot initiative to let the voters decide if the council "refused to act," as she said. Despite the minor setback of an ethics investigation into her office's role in the ballot initiative, it seems like the initiative is progressing.
According to a statement from the movement yesterday, Tax Amazon "has collected over 15,000 ballot petition signatures" in just 15 days. It will need to get 30,000 by early July in order to make it on the November ballot as Initiative 131. That's a big improvement from where they were around a month ago (was it really just a month ago?) when the campaign was concerned about the prospect of signature gathering during the COVID-19 pandemic with a state under house arrest. (As a rule, the Washington Secretary of State's office can only accept handwritten, "wet" signatures.)
Maybe we really will get all three taxes.