After years of trying to mine the wealthy around here, and instead hitting themselves in the face, the Seattle City Council has finally fixed on a potent way to tax the rich.
Seattle’s latest corporate tax scheme will almost certainly run into some familiar obstacles, such as a skeptical mayor and a possible legal challenge from big business.
But politically, this one is nothing like the failures of the past.
It’s the work of Council member Teresa Mosqueda, and the premise is simple enough: Instead of tilting at windmills to try to tax wealth or high incomes, which is legally questionable in our backward state, this plan instead puts a levy on high employee salaries and compensation packages.
Call it a CEO tax — or more accurately, a management or boss tax. Oh and throw in the millionaire pro athletes, too.
Even critics are straining to come up with strong political arguments against it.
Said Sean Reynolds, owner of Summit Properties NW who does a pro-business podcast: “Is this a fair thing? Should we do the Robin Hood thing and steal from the rich to give to the poor? Because that’s essentially what Seattle is proposing.”
To which I bet most Seattleites would say: “Yes, and it’s about time.”
We’ve spent a decade flogging ourselves for having an upside-down tax system that hits the poor and middle classes the hardest, but we never do much about it. This would shift the balance back a smidgen.
Mosqueda’s plan, which passed a city committee this past week and is expected to pass a full council vote Monday, would place a 0.7% tax on pay in the city higher than $150,000, assessed on the company’s payroll. The rate goes up to 1.7% for pay above $400,000. Then it tiers even higher for the biggest businesses — in other words, Amazon would pay up to a 2.4% levy on compensation north of $400,000. All smaller businesses with payrolls below $7 million are excluded, and no business would pay anything for any worker making less than $150,000.
What’s smart is that this avoids the fatal flaw with all of Seattle’s past business tax schemes — which is that they taxed basic jobs. That’s what killed the infamous “head tax” of a few years ago. Grocery stores such as Uwajimaya pointed out they would be paying a flat-rate levy even on minimum-wage checkout clerks. That was bad policy, and even worse politics.
Kshama Sawant’s deceptively named “Tax Amazon” proposal from this spring likewise would have charged fees on the pay of all the workers at larger businesses. That would have roped in everyone from nurses at assisted-living facilities and dough-flingers at Pagliacci pizza — in businesses suffering mightily in the pandemic.
But charging a point or two to the tech execs, such as Amazon’s S-team? To the bosses in the C-suites? To the Mariners and Seahawks extravagantly-compensated rosters, after we the taxpayers financed both of their stadiums? Again, I bet the broader public will say: “What took so long?”
Mosqueda’s proposal, which is modeled after a bill in last year’s state legislative session by Seattle Rep. Nicole Macri, is also savvy for another reason. It directs most of the estimated $214 million in revenue in the first year (2021) to helping people and smaller businesses recover from the inequity-widening pandemic. Later, in 2022, it shifts most of it to the original purpose, which is housing for the poor and homeless.
Amazon may fight back, as it did two years ago when it halted downtown construction to protest the head tax. But the pandemic has counter intuitively turned into a bonanza for Amazon. The company’s market value has jumped 50% this year — to $1.45 trillion (right behind Apple and Microsoft). Even as your own personal economy craters, Jeff Bezos’ wealth has soared nearly $60 billion just since March 1st.
At what point must even libertarian Amazon concede it has become far richer than its hometown, which is struggling and needs a little help?
Mayor Jenny Durkan and others are right that a regional business tax would be better, because pandemic relief and homelessness aren’t solely Seattle problems. Portland voters passed a larger, $250 million per year tax on the wealthy, spread over three counties, which is how we probably should do it here, too.
But we’ve been through decades of hand wringing about our state’s retrograde tax system, with zero movement. There’s also been years of talk about how business and political leaders will soon come together for some chimerical deal on homelessness. It’s like waiting for the Mariners to win the pennant. It’s always on the shimmering horizon, a year or two away.
Something was bound to snap. It just did, down at Seattle City Hall.