After months of talk, planning and speculation, the Seattle City Council has decided to consider a big-business tax again, this time while also grappling with the coronavirus crisis.

The council voted unanimously Monday to review legislation proposed by Councilmembers Kshama Sawant and Tammy Morales that would impose a 1.3% payroll tax on most companies with more than $7 million in annual payroll, excluding grocery businesses and some other entities.

Since last year’s council elections, Sawant, Mayor Jenny Durkan and others have been eyeing a tax on large corporations.

Durkan helped put together a state bill that would have allowed King County to tax compensation paid to high-earning employees. Some business leaders sought a provision banning Seattle from enacting its own tax, and the plan died in Olympia.

Sawant and Morales have said their tax could raise as much as $500 million a year. They’ve called for Seattle to spend $200 million this year on coronavirus relief payments to many vulnerable families and for the tax subsequently to pay for rent-controlled housing and Green New Deal programs.

Under their plan, the tax would take effect in June, but it wouldn’t be collected until 2022. To send the payments this year, the city would borrow $200 million total from its Low Income Housing Fund, Housing Incentive Fund, Families Education and Preschool Promise Levy Fund, Move Seattle Levy Fund, Seattle Park District Fund and Library Levy Fund.

Advertising

“We’re staring down the barrel of an unprecedented emergency,” Morales said Monday, arguing the plan could provide short-term relief and make the city’s tax system more equitable in the long term.

Today, a poor family in Rainier Beach pays a much larger percentage of its income in taxes than a wealthy family in Laurelhurst, said Morales, who represents South Seattle.

Councilmember Alex Pedersen, who represents Northeast Seattle, said he’s concerned “about introducing a new tax at a time that we’re going through this pandemic … going into a recession.”

While the tax likely could apply to about 800 companies across various industries, according to the council, Sawant has referred to her proposal with Morales as an “Amazon tax,” singling out the tech giant.

She pushed for the legislation to be heard in the sustainability and renters’ rights committee that she chairs, describing herself as the standard-bearer for a grassroots movement that supports the proposal. Neither Morales nor Sawant’s other colleagues supported that plan, however.

Instead, the council sent the Sawant-Morales legislation to the budget committee that Councilmember Teresa Mosqueda chairs. Unlike most other committees, the budget committee includes all nine council members, rather than only five. The move should put Mosqueda, rather than Sawant, in the driver’s seat, and it should allow all of the council members to take part in working through the legislation.

Advertising

Like Sawant, Mosqueda has said she believes Seattle should pursue new, progressive sources of revenue. In 2018, when the council passed and then almost immediately repealed a per-employee “head tax” on big businesses, only Sawant and Mosqueda voted against the repeal.

But whereas Sawant represents Capitol Hill and the Central District and is a leader in the Socialist Alternative group, Mosqueda is a citywide representative and has close ties to union leaders. Before she was elected in 2017, she served as political director for the Washington State Labor Council.

Council President M. Lorena González said the legislation belonged in the budget committee partly because the potential tax could have major budget implications. Seattle is projected to incur a deficit of at least $200 million this year, González said, because the coronavirus has shut down business activity that generates revenue for the city.

Leaders of some organizations, such as the Tenants Union of Washington State, support the Sawant-Morales legislation, and an online petition has attracted thousands of signatures. Leaders of other organizations, such as the Downtown Seattle Association, are opposing it.

Durkan last week raised concerns about the proposed $200 million in loans, saying the economic situation has created uncertainty.

Boosters of a big-business tax, including Sawant, have launched a campaign to put an initiative on the November ballot in case the council declines to act.

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 separate from those functions and remains independent.