Seattle City Council members were served more data and opinions Wednesday as they continued to chew over a tax on large corporations and a plan to borrow money for coronavirus emergency assistance.
The tax on companies with annual payrolls over $7 million would apply not only to traditional employers but also to gig-economy businesses, such as Uber, a council central staff analyst said during a budget committee meeting held remotely. Compensation paid to independent contractors, like Uber drivers, would, for the purposes of the tax, be treated like wages paid to employees, analyst Tom Mikesell said.
But franchises, such as McDonald’s, could avoid the 1.3% payroll tax championed by Councilmembers Kshama Sawant and Tammy Morales, because each location would be treated as a separate business, Mikesell said during the council’s second committee meeting on the proposal.
The central staff, which provides nonpartisan analysis for all nine council members, has estimated the tax could raise $500 million a year. Under the Sawant-Morales plan, the money would initially be used for emergency relief, then to build affordable housing and carry out green-building upgrades.
Mayor Jenny Durkan has criticized Sawant and Morales for selling their proposal as a coronavirus measure, because the tax could take effect immediately but wouldn’t be collected right away. Their plan to send $200 million in cash assistance to 100,000 households this year would require Seattle to initially borrow that money from existing sources, such as funds associated with the city’s housing, education, transportation and library property-tax levies and its parks property-tax district.
The city would use the big-business tax to repay those funds later on, with interest, after putting together a system to collect the money. The mayor has described the move as risky and, in an interview with KING 5 last week, she said about the Sawant-Morales plan: “There is no scenario under which people would receive checks this year. That never is going to happen, and I think it’s irresponsible for anyone to say that that’s even possible.”
The loans could be made without eliminating or delaying projects the property-tax funds are earmarked for, another council central staff analyst said Wednesday.
Not all the money that flows into the funds gets spent right away; the city expects the funds to close out this year with a collective balance of more than $300 million, analyst Dan Eder said. The city regularly loans money between its funds, though $200 million would be an unusually large sum, Eder said.
The economic crisis brought on by coronavirus-related business closures is carving a hole in the city’s budget, which relies on existing business and sales taxes. Seattle could collect $300 million less revenue than expected this year, and the levy funds that Sawant and Morales want to borrow from could be needed to help plug that gap, Durkan’s budget director said last week.
Proponents and opponents are organizing to lobby the council. “When somebody says it will not happen … that’s our cue to make it happen,” the Rev. Angela Ying, pastor at Bethany United Church of Christ, said during an online rally with Sawant before the meeting, referring to Durkan’s remarks.
Ying and a number of other religious leaders have signed a letter backing the tax, contending Seattle’s largest companies can afford to help working people, while many business leaders and other opponents have signed a letter against the proposal, arguing the measure could discourage hiring and drive companies away. Both sides are circulating petitions online.
Sawant has called her proposal an “Amazon tax,” though the tax could apply to about 800 companies. Foes have labeled the measure a “tax on jobs.”
“Large and small businesses coexist as part of the same ecosystem,” restaurant owner Taylor Hoang said during the council’s public comment session Wednesday, arguing a “ripple effect” caused by the new tax would hurt small businesses already hit hard by the coronavirus crisis.
“This isn’t a tax on jobs. It’s a tax that creates green jobs,” North Seattle resident Brent McFarlane said in response. Some of the money would be spent to install solar panels and electric heat.
The council won’t discuss the tax again until May 13, but less-public conversations are bound to continue, likely with Durkan and Councilmember Teresa Mosqueda in leading roles. Because the Sawant-Morales proposal is emergency legislation, the mayor has absolute veto power. Mosqueda chairs the council’s budget committee and has signaled interest in negotiating some changes in order to secure coronavirus relief.
She invited several panelists to share perspectives on the coronavirus crisis Wednesday, including a supermarket worker, a homeless services worker and an immigrant-rights advocate. They said people who were marginalized and struggling before the pandemic are even more desperate now.
The proposed tax also got a boost from Molly Moon, whose popular ice cream shops have been shuttered along with other businesses. She described the measure as a “a pretty good” start, while urging proponents to stop using “divisive language” that could alienate people who work for tech giants.
Moon’s payroll is under $7 million, so her business wouldn’t be taxed. “I have always believed that businesses and folks who make a lot of money need to pay to help our community be a wonderful place,” she said. “We also want our customers not to leave Seattle, but I think there’s a way to do all of this.”
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 remains independent.