The Seattle City Council began deliberating a new proposal to tax big businesses Wednesday by spotlighting how the measure could be used to combat crises in public health, unemployment and housing that Councilmember Kshama Sawant labeled a “triple emergency.”
The plan championed by Sawant and Councilmember Tammy Morales could possibly underwrite coronavirus-relief cash payments totaling $2,000 each to about 100,000 lower-income households this year, were the city to initially borrow $200 million, council staff said at a budget-committee meeting held remotely. From 2021 through 2025, the payroll tax could raise more than $500 million annually, create 5,600 units of affordable housing and convert even more existing homes to electric heat, the staff said.
Long before the pandemic hit, Seattle was dealing with high rents and persistent homelessness, Sawant said. “We have to do something to provide support to our neighbors who are suffering,” Morales added a day after Mayor Jenny Durkan, who holds absolute veto power over emergency legislation, expressed doubts about the proposal’s ability to provide relief right away.
Through 2025 in total, the Sawant-Morales legislation would reserve $1.8 billion for affordable housing, $84 million for housing with support services for people with particular challenges, $648 million for Green New Deal projects and $92 million for administrative costs, council staff said. Special, appointed boards would oversee the spending.
Many spending details are undecided or up for debate. For example, there are multiple ways the council could select cash recipients and multiple views on who should qualify for affordable housing. The Sawant-Morales plan says the units would be available to households with up to 100% of the area’s median income, which was $108,000 for a family of four last year. Most households barely making rent are below 80%.
Changes and objections by other council members are still to come. Seattle might want to consider directing some proceeds toward child care subsidies, food banks and small businesses, said Councilmember Teresa Mosqueda, who chairs the budget committee.
Mosqueda said she wanted to start by discussing what the new revenue could accomplish after hearing about the hole the coronavirus crisis is blowing through Seattle’s existing tax structure. The city could collect $3o0 million less than expected this year in revenue earmarked for basic services such as parks and police, budget director Ben Noble told the council, repeating points he and Durkan made Tuesday.
Relying on regressive sales and business taxes has made Seattle vulnerable during downturns, Morales noted. “Austerity budgeting is the wrong approach,” Mosqueda said, making the case for government interventions rather than service cuts.
The council didn’t immediately dissect the 1.3% payroll tax rate proposed by Sawant and Morales, nor the 800 or so companies with annual wage bills greater than $7 million that would be required to pay. Mosqueda said that would happen next week. But a political clash over those combustible topics already has begun, with proponents and opponents voicing opinions on their own schedule.
The battle lines resemble those that split Seattle in 2018, when the council passed a per-employee “head tax” on large corporations and then quickly repealed the measure under pressure from opposed voters and businesses that included Amazon.
Councilmember Alex Pedersen jumped out against the Sawant-Morales plan this week, warning in an op-ed the new tax could discourage companies from making post-pandemic hires and encourage them to leave town. That made Pedersen a target during a public-comment session Wednesday dominated by the proposal’s backers.
They spoke about Seattle’s wealth gap, neighbors whose incomes have dissolved during the coronavirus crisis and essential workers risking their lives. Demand for Amazon’s home-delivery service has surged, making billionaire boss Jeff Bezos even richer, they pointed out.
Pedersen and other opponents are using “scare tactics” when describing the Sawant-Morales legislation as a “tax on jobs,” bus driver Jim Sanders said. “Don’t be fooled, working people,” Sanders said. “Big business can pay this tax.”
Hundreds of business leaders have signed a letter asking Durkan and the council to reject the “poorly timed” Sawant-Morales proposal, as part of an effort partly led by the Downtown Seattle Association. The signatories include some representatives from construction-worker unions, and an online petition opposing the tax has collected several thousand signatures.
Meanwhile, an online petition backing the proposal also has collected thousands of signatures. The tax could support thousands of construction and green-collar jobs, Sawant said Wednesday.
She and Morales say their plan would send coronavirus relief payments to low-income households this year. To do that, Seattle would need to borrow $200 million from existing sources, such as its housing, education, preschool, transportation and library levies. The city would use the big-business tax to pay those sources back later, with interest.
Durkan has questioned that idea, calling it risky and unrealistic, and the mayor has serious leverage because Sawant and Morales have written their tax as coronavirus emergency legislation. Such bills are immune from popular referendum but must win seven of nine council votes and mayoral approval, with no option for the council to override a veto.
The Sawant-Morales tax would exempt nonprofits, government entities and grocery businesses, defined as those that rely on food-related sales for at least 75% of their gross incomes. Yet the Northwest Grocery Association is opposing the proposal. Many stores wouldn’t qualify because they also sell products such as prescription drugs and gasoline, the association said.
Looking ahead, Mosqueda wants to consider “exemptions or deferrals for certain struggling industries,” she said. She has scheduled a second meeting for April 29 and a potential committee vote for May 13.
Editor’s note: While The Seattle Times as a corporation likely would be affected by the proposed tax, and its editorial board has commented on it, The Times’ news coverage is remains independent.