In this year alone, at least five tax-hike proposals are coming down the pipeline at the Metropolitan King County Council, including an arts tax, a roads tax, at least one transit tax and a $1.7 billion Harborview Medical Center bond measure. By any standard, that’s a whole lot of potential tax increases. Last week, the first planned tax increase was officially put into motion in Olympia with the introduction of House Bill 2907.
Of all the potential new taxes, this is the one that has me the most concerned — an employer sleeper tax of 0.1% to 0.2% on salaries of $150,000 or more. It would hurt small businesses and our workforce by taxing businesses with more than 50 employees. House Bill 2907 creates a pathway for King County to implement a countywide tax on employee wages, and unlike the vast majority of tax increases, this tax would not go on the ballot for the voters to decide. If the bill passes the Legislature, the tax would become law by simple majority vote of the nine King County council members.
Not surprisingly, this new type of head tax is being championed mostly by legislators who live in Seattle. Elected local leaders in the city, with the backing of a handful of our nation’s largest companies, are eagerly selling HB 2907 as a tax on overpaid executives working for the richest corporations.
If this tax on jobs sounds familiar, that’s because it’s strongly reminiscent of Seattle’s highly controversial 2018 “head tax” experiment in which a similar tax was imposed by the Seattle City Council to generate about $47 million per year in revenue. But the original head tax is peanuts compared to the $121 million in annual new taxes now being sought under “Head Tax 2.0.” Moreover, what was once limited to the city of Seattle would apply to 38 other cities and all of King County.
While certain big companies who support this Head Tax 2.0 know that they can afford to absorb the hit, their real motivation is to protect their investments and workforce already in Seattle. Why is that? The answer is that they know that the Seattle City Council is capable of a much more harmful alternative, a head tax on all or many employees that would really hurt their bottom line. They feel that if Head Tax 2.0 passes and 43% of the total revenue goes to the city as promised, the Seattle City Council won’t try another run at its own head tax. These companies should be very cautious, however, because as it is currently written there is nothing in the legislation that prohibits Seattle from passing its own, additional head tax in the future even if this new countywide tax becomes law.
Though defenders of this tax on jobs are selling it as a big business tax, the devil is in the details. This legislation exempts “small businesses” from the tax only if you accept their definition of a small business as having fewer than 50 employees — but no one else uses that definition. According to the Small Business Administration, with a few exceptions, most small businesses can range anywhere from 250 to 1,500 employees. This is very different from the bill’s standard of just 50. Let’s not forget that small businesses are the very lifeblood of our region and are, by far, the largest creators of jobs in our economy. This head tax would target everyone from farmers to tech entrepreneurs to our remaining local family business owners.
Head tax 2.0 acts like an income tax because it’s based on wages and feels like a head tax because it punishes employers for hiring, and creates yet another disincentive for new employers and workers to locate here. And of course, as is true with all taxes, once the camel’s nose is under the tent and this new tax is in place, how long will it be before its reach is expanded?
And if you weren’t already having a strong sense of déjà vu, proponents are justifying the Head Tax 2.0 as necessary to pay for Seattle’s homelessness crisis. As voters are told that they need to support the tax in order to be compassionate toward the homeless, consider this: Seattle and King County already spend an average of $17,000 each for the 11,000 homeless on our streets every year. That’s one of the highest amounts per homeless person in the country. And yet, Seattle has arguably the highest homeless population per capita of any city in the U.S.
Just last month, our community came together in a bipartisan fashion to craft the first ever King County Regional Homeless Authority with the agreed-upon understanding that we would work together to improve the existing homelessness response system without raising taxes. The new Regional Homelessness Authority hasn’t even had its first meeting yet, and new taxes are already being sought. Perhaps it makes more sense to let this body do the work it’s meant to do — identify data-driven strategies and systematic efficiencies to help the homeless population get back on its feet — before we rush to pass yet another tax.
If all we’re doing is putting more money behind failed policies, this tax may actually exacerbate the existing systemic issues that have made Seattle a dead-end street for people who experience homelessness.