Seattle City Council passes tax on big businesses

The Seattle City Council has passed a new payroll tax on big businesses.

The move comes just two years after the council passed, and then quickly repealed, a controversial "head tax" on large companies.

“This is the promise of JumpStart, to invest in our community,” said Councilmember Teresa Mosqueda, the prime sponsor of the "JumpStart Seattle" legislation.

“To invest in housing, child care, invest in small businesses, support immigrants and refugees, support working families. This is not only the remedy for the emergency that is Covid, but it helps us correct an upside down tax code.”

The new tax differs from the previous attempt in 2018:

• It is levied on businesses with an annual payroll of $7 million per year or more. It would target payroll for employees making $150,000 per year and up.
• The tax rate varies depending on the size of the company and the level of employee compensation. It ranges from 0.7- 2.4%.
• Grocery stores and government entities are among those exempt from the tax. An amendment made shortly before the legislation was passed also exempts non-profit healthcare entities for three years.
• It will take effect in 2021 and sunset in 20 years.

The tax is estimated to raise more than $200 million per year to fund things like Covid-19 relief, affordable housing and equitable community development.

Veto-proof majority

The bill passed with seven of nine council members voting for it. Only Councilmembers Debora Juarez and Alex Pedersen voted against the measure.

If that majority holds, the council could override a mayoral veto if one were to come. Seattle Mayor Jenny Durkan’s office did not indicate Monday what action she would take.

However, in a statement, a spokesperson said the mayor has significant concerns about the impact of the tax.

The statement also noted Durkan is a supporter of progressive taxes and favors a regional payroll tax on big businesses.

Councilmember Kshama Sawant, who has been a long-time proponent of a large business tax and who introduced her own legislation earlier in the year, applauded the passage of the bill.

She called the vote a “historic victory” for working people and credited grassroots efforts for creating the pressure to get legislation through the council.

Council President M. Lorena Gonzalez called the tax a smart approach and said the council was elected to make tough choices, identify policy issues and come up with possible solutions.

"Given this triple crisis, I do think that the political winds have significantly changed across the city. I think our constituents across the city want us to take action now," Gonzalez said.

Business opposition

Those who gave public testimony ahead of the council’s vote on Monday were overwhelmingly in support of the tax.

However, it has received pushback from some in the business community.

The Downtown Seattle Association released a statement Monday that raises concerns about the tax, especially in light of the financial strain many companies are experiencing due to the pandemic.

“Taxing jobs is bad public policy, and it is even more concerning as Seattle faces double digit unemployment,” the statement said.

“Job taxes are counterproductive to job creation and have a history in Seattle of being enacted and then later repealed. This tax should follow that fate."

Amazon, a vocal critic of the tax the city passed and repealed in 2018, declined to comment on the newly passed legislation Monday.