Seattle City Councilmembers Kshama Sawant and Tammy Morales, who have proposed a new tax on big businesses like Amazon, say they intend to introduce the legislation Monday and say the tax could help finance coronavirus relief payments for many vulnerable families.
Seattle should spend $200 million this year on emergency cash payments to individual households for needs like groceries and medical bills, Sawant and Morales said in a telephone news conference Wednesday. That would allow the city to send $500 each month for four months to 100,000 households, the council members said, not accounting for potential administration and distribution costs.
Under their plan, a tax requiring big businesses to pay 1.3% of their payroll to the city would take effect in June, but wouldn’t be collected until 2021 or 2022. In order to send emergency relief payments to households this year, Seattle would borrow $200 million from other, existing funds and repay the money with interest later on, they said.
“This public health crisis has quickly become an economic crisis, too,” Morales said, citing the huge number of Seattle workers who have lost jobs due to pandemic shutdowns and arguing the one-time payments on their way from the federal government won’t be enough for many households. “We have to act urgently to provide relief.”
Sawant and Morales “have not reached out” to Mayor Jenny Durkan about their latest proposal, Durkan spokeswoman Kelsey Nyland said in an email, stressing the mayor has been focused on the city’s coronavirus emergency response and obtaining more federal aid.
“She hopes to work with any council members on the significant budget shortfalls that the city will be facing this year and into the next biennium,” said Nyland, noting Durkan is pushing out grants for small businesses and supermarket vouchers for 6,000-plus families.
Seattle has made some large interfund loans in the recent past, such as $85 million to help rebuild the downtown seawall and $35 million to help rebuild Mercer Street, said Kirstan Arestad, executive director of the council’s central staff. Central staffers are working to identify six funds that could collectively contribute $200 million, Arestad said.
“We’ve never done an interfund loan at the scale suggested by the council members,” Nyland said. “The city only issues interfund loans when we have strong confidence in the source that will be used to repay the loan. In addition to potential legal challenges or ballot measures, the city anticipates declines in all of our economically dependent revenues, including sales tax, business and occupation tax and utility taxes.”
She added, “Ultimately, without further details about what specifically is being proposed it is impossible to assess these risks and uncertainties.”
Last month, the city’s budget office predicted the virus would punch a $100 million-plus hole in Seattle’s 2020 budget, partly due to a hit in sales tax revenue, and a report commissioned by the Seattle Metropolitan Chamber of Commerce suggested Washington cities seek new revenue sources.
It’s unclear whether there’s enough support on the council to pass a new tax on big businesses. Though workers wouldn’t pay the tax, critics say payroll taxes will drive down wages. The Seattle Chamber has opposed previous attempts to impose a new tax on large corporations.
“We are in a crisis that calls for collaboration and partnership,” Chamber spokeswoman Alicia Teel said in a statement Wednesday. “Our economy looks very different than it did a month ago and we need leaders to bring us together, not drive us apart. is working with local, state, and federal leaders to make that recovery as inclusive as possible.“
An online petition supporting the tax idea has attracted thousands of backers, Sawant said. She and other advocates have launched a campaign to put a tax initiative on the November ballot in case the council doesn’t act.
Representatives for the Tenants Union of Washington State and unionized graduate student employees at the University of Washington expressed support Wednesday, with Tenants Union leader Violet Lavatai emphasizing how many people are desperate for help right now.
Large corporations are getting bailed out by the feds while working people struggle, Sawant said. Seattle-based Amazon is doing brisk business making deliveries during the coronavirus crisis, the council member noted.
“With the coronavirus raging … we need to tax those with extreme wealth,” Sawant said, mentioning Amazon’s Jeff Bezos, “to ensure the rest of the city can have food, shelter, clothing and other basic necessities.”
The council voted unanimously Monday to approve a nonbinding resolution asking state and federal leaders to cancel rent, mortgage, property-tax and housing insurance payments during the coronavirus crisis. The lobbying maneuver didn’t describe how that might work and didn’t change circumstances on the ground in Seattle; rent and mortgage payments are still due.
Leaders from several other cities, such as San Francisco and Los Angeles, joined Morales on a video call Wednesday in calling for rent and mortgage payments to be canceled.
Before the coronavirus slammed the city, Sawant and Morales released draft legislation for a tax on large corporations they said would raise $300 million annually. They called for the revenue from the tax to be used to build rent-controlled housing and to convert existing homes to clean energy.
In mid-March, the council members pivoted, calling for a tax that would raise $500 million annually and suggesting the revenue could initially be spent on coronavirus relief efforts. Nonprofit organizations, government and education entities and grocery stores all would be exempted from the tax.
Sawant and Morales didn’t release an updated version of their legislation Wednesday but did share some new details.
According to a summary, they still want to impose a payroll tax on companies with at least $7 million in annual payroll and predict about 800 companies would be taxed.
In an earlier plan, Sawant called for a 1.7% tax rate to raise $300 million. She and Morales later said a 0.7% rate would be adequate, based on better data. They’ve now settled on 1.3% rate to raise $500 million, calculating that based on 2018 payroll data boosted 14% for inflation and reduced 12% to account for the coronavirus factor.
Sawant and Morales say $200 million this year could be distributed to households already enrolled in various Seattle assistance programs. The council members say vulnerable people such as unemployed workers, seniors and immigrants would be prioritized, via a process not yet determined. Later on, the tax revenue could be used to build rent-controlled housing and to convert homes to clean energy, they say.