JumpStart Seattle, Councilmember Teresa Mosqueda's high-earners payroll tax legislation that passed last week 7-2, isn't popular with everyone. Washington State Sen. Reuven Carlyle, who represents Seattle in the Legislature, has joined the likes of the Seattle Times Editorial Board, the Downtown Seattle Association, and MyNorthwest in admonishing the tax.
In a tweet last week, Carlyle argued that "a city tax is the wrong level of government" and that companies could avoid it when they "explore how & whether & where to return [sic]." In other words, Carlyle is concerned that businesses will jump ship out of Seattle:
With the #waleg facing a $8.8B deficit, a state-level payroll tax is a viable, measured, progressive option to help protect vital services & balance the budget. A city tax is the wrong level of gov't. It's easily avoided as downtown jobs explore how, whether & where to return. https://t.co/nEtOXDRsDW
— Sen. Reuven Carlyle (@Reuvencarlyle) July 10, 2020
JumpStart Seattle will put a tax on the compensation of high-earners at corporations that report over $7 million in annual payroll at different rates depending on the level of compensation and how much payroll the company reports. Only compensation over $150,000 annually will get taxed.
"We cannot assume that a healthy downtown economic core with good-paying jobs is inevitably guaranteed as a moral right of just being Seattle," Carlyle told The Stranger. But, he's not against a payroll tax. He's in favor of a state or county tax with "lower rates, more broadly applied, and with fewer exemptions," Carlyle said.
It's not an ideological concern, Carlyle said, but about "what works."
His argument is that a city tax is not sweeping and that as companies whose workforces have functioned fine remotely evaluate how they'll set up shop in a post-COVID-19 world, they might be deterred from choosing Seattle with the payroll tax. That's the same argument the Times made in their editorial kowtowing to Seattle's "largest corporate citizen," Amazon.
What's fun is that the JumpStart Seattle tax has a clause baked into it that will sunset the tax if King County or the state pass a similar measure. So, Carlyle could have his more expansive tax if he wanted to. Only if it were at the same rate as the JumpStart tax, though.
Carlyle said he'd rather do a payroll tax at the state level as a "modest payroll tax on high earners in the $250,000 or $300,0000 range." That would be more modest than the payroll tax the Legislature failed to pass this past session that Stranger writer Rich Smith calculated would cost companies less than a holiday party. That failed tax—which would have taxed more people than Carlyle's hypothetical plan—would only have raised $121 million for the state. Mosqueda's city tax will raise an estimated $214 million for Seattle alone.
While Carlyle, who is friends with Mayor Jenny Durkan, would not say whether he believed Durkan should veto the measure (which could be overturned with six council votes), he thinks her idea to instead implement a "flat rate 1 percent income tax" instead of a business payroll tax is "a compelling policy."
Durkan has not introduced a plan for that tax. The council, meanwhile, is ironing out the details of JumpStart Seattle and is making headway on a capital gains tax proposal. The state Legislature has tried and failed to pass a capital gains tax for the better half of a decade.