Seattle City Council advances new tax on large businesses

Seattle is one step closer to implementing a tax on large businesses.

City Council members passed legislation out of its budget committee on Wednesday that aims to tax companies with a yearly payroll of $7 million or more.

The tax would be levied on payroll for high earners making $150,000 and above, with different rates depending on the size of the business and the level of employee compensation.

The legislation -- titled Jump Start Seattle -- was introduced by Councilmember Teresa Mosqueda. The full council is expected to consider and vote on it next week.

If voted into law, the tax would be roughly four times the size of the controversial business tax that was passed, and then quickly repealed, by the council in 2018.

Jump Start Seattle tax

The tax is estimated to raise more than $200 million per year. Funds could go toward a range of things, including Covid-19 relief, equitable community development, and housing in Seattle.

Council members discussed amendments to the legislation for hours on Wednesday.

Several changes were made, including the addition of a third tier of taxation rates. That would mean the tax would range from 0.7 percent to 2.4 percent, depending on the size of the company and salary levels for employees. A 10-year sunset clause was also eliminated.

An amendment put forward by Councilmembers Debora Juarez and Alex Pedersen to take the issue to voters in November failed.

Councilmember Tammy Morales said during the meeting that this legislation will provide funding to invest in communities of color, among other services.

“This begins to address the history of under-investing in Black and brown neighborhoods by shifting the burden to the wealthiest corporations in the city,” Morales said.

Councilmember Kshama Sawant, a long-time advocate for a tax on big businesses, noted that passing the bill out of committee was a win and a credit to the movement that fought for a so-called "Amazon Tax."

“This is a historic victory and we on the ground will do everything we can to spread our movement,” Sawant said. “Our rallying cry everywhere must be 'no' to austerity, 'no' to budget cuts under this pandemic and recession. Tax big businesses in every city not — working people.

“Jeff Bezos, our movement is coming for you,” she said.

Seven out of nine council members voted for the tax at Wednesday's committee meeting, with only council members Juarez and Pedersen voting against it.

Juarez said she supports a progressive tax and a tax on corporations, but she said she believes the issue should go to the voters.

Opposition

Members of the business community expressed strong opposition to the tax Wednesday before the council’s vote, citing severe economic hardship linked to the pandemic.

A letter sent by the Downtown Seattle Association, the Seattle Metropolitan Chamber of Commerce, and multiple other groups stated:

“The decisions and actions of City government over the next several months will impact Seattle’s path to economic recovery over the next several years. The best way to ensure City tax revenues begin flowing strongly again is to get Seattle’s economy back on its feet, not by imposing new taxes that will only place more hurdles in front of our recovery efforts.”

This is the not first time the council has attempted to pass a tax on employees, often called a "head tax" or an "employee hours tax." A similar tax was passed in 2006, then repealed in 2009. There was another short-lived attempt in 2014.

The Seattle City Council debated another tax in 2017. The council eventually passed the head tax in 2018, which drew both fervent support and passionate opposition. An effort was then launched by citizens and the local businesses community to gather signatures for a referendum, which would have put the final decision in the hands of the voters. The council, however, opted to repeal the tax nearly a month after passing it.