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Seattle a step away from approving new ‘progressive revenue’ tax on big businesses to help overcome COVID-19 budget crisis

With reporting by Seattle City Council Insight

Taking a route closer to the middle ground on bridging Seattle’s coming COVID-19 crisis revenue gap, the Seattle City Council approved “progressive revenue bill” CB 119810 out of committee Wednesday, that will create a new tax on the city’s largest businesses that could generate more than $200 million a year for city services.

“Today we voted on a major structural change in how we finance public services,” South Seattle rep and co-sponsor Tammy Morales said about the passage. “Throughout this renewed budget conversation, I voiced my strong desire to see a sizable progressive revenue package that begins to address the enormity of the issues our city faces.”

The proposal will create a payroll expense tax on businesses located in Seattle with more than $7 million in gross payroll on “high income earning employees.”

The 7-2 approval sets up a final vote this coming Monday by the full council. Council member Alex Pedersen and Debora Juarez voted against the plan saying the preferred that voters decide on the tax.

Wednesday’s approval of budget chair Teresa Mosqueda’s plan for a tax on big businesses is hoped to help Seattle overcome its forecasted budget shortfalls due to COVID-19 and to fund affordable housing, equitable development, and economic support for small businesses. The session included debate on more than 20 proposed amendments to the proposal.

Supporters of District 3 representative Kshama Sawant’s more aggressive Tax Amazon proposal managed to also find victory Wednesday in the form of an approved amendment that increased the amount collected by millions. It added a new middle tier for companies with total Seattle-based salaries between $100 million and $1 billion, adjust the threshold for higher salaries from $500,000 down to $400,000, and increased the tax rates across the board for the higher salary tier. The amendment increases the expected 2021 revenues from $175 million to $214 million.

The council also voted out of committee the accompanying “Jump Start” spending bill, after stripping out most of the quantitative commitments in the bill. The final version lists a number of categories of spending, with an expectation that the City Council will make exact appropriations annually as part of the budget process. Mosqueda intends to write the first year’s spending plan into a resolution, which she will bring forward for a vote on July 15th.

Pedersen offered two amendments, both of which passed unanimously. The first added a requirement for new programs funded in the spending plan to be evaluated and reported back to the Council. The second placed restrictions on membership on the related Oversight Committee to prevent rampant conflicts of interest by limiting the number of members who work for organizations receiving funding from the tax revenues.

The final bill passed by an 8-0-1 vote, with Pedersen abstaining.

Despite council member Lisa Herbold’s pleading with the business community not to organize a referendum campaign against the bill, it may still be challenged in court, particularly over its “top tier” higher tax rates which seem to apply to just one company: Amazon.

In 2018, the city council passed and then rolled back a $275 per full-time employee tax on companies reporting $20 million or greater in annual “taxable gross receipts.” That tax would have generated only about $50 million annually.

The effort reshape the city’s budget for cuts forced by the COVID-19 crisis will continue next week with the final vote on the business tax and renewed debated on Seattle Police spending.

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38 thoughts on “Seattle a step away from approving new ‘progressive revenue’ tax on big businesses to help overcome COVID-19 budget crisis

      • Amazon has already started the migration of 10,000 + employees out of south lake union to Bellevue. This is to be completed by end of 2021.
        Many residents of downtown, cap hill, regrade and all over Seattle will be picking up and moving to the East side.
        Good luck with the recovery to the restaurants, stores, clubs, bars when these people are gone.

        Another win by Sawant, idiot.

      • You mean the ones they’ve leased, or bought? The leased ones they walk away from. The ones they own? Pfft, you think they care? I thought your point Is that they’re so rich they can afford to pay the tax? Well guess what— if they’re that rich, they can sell the buildings at a loss if they have to, and not GAF.

      • Oh, people and businesses will be moving away for sure, although I suspect Seattle will continue to be a magnet for the unemployable.

      • As long as I can remember, people have been claiming that “Seattle is dying”; taxes are so high that no sane person would want to live there or no sane business would want to exist there. Hell, Sinclair even made a snuff film about it!

        $15 minimum wage will kill restaurants. ST3 will kill the rental market. I could go on forever.

        I get it. Ayn Rand Conservative types (who I question even live in Seattle, yet seem obsessed with it) are green with envy to see not-Ayn Rand Conservatives running a city that people and businesses are flocking in droves to and love to get on their soapbox and predict the end of the Seattle.

        But just like the end of the world predictions you hear about every year or so, the “taxes are going to kill Seattle, just you wait!” crowd is 0 for at least 100 at this point.

        Let’s make it 0 for 101? Amazon ain’t going anywhere. Bezos has made so much money in the last few years that he’s made up the amount he gave up in his divorce, and then some. This head tax will be a pittance for him.

  1. You neglected to mention the bill also targets employees who reside in Seattle where their employer is not in Seattle.

    Section 5.38.020 towards the end.

    • Such bullshit. “We will move before we pay a tax we can afford because we value profits over the community where we do business and our employees reside” Maybe they can move to Trumplandia or Russia. Seattle is a nice place to live, but it isn’t free. Since Reagan corporate taxes are at a historic low while employees pay a higher rate. When are we going to stop bowing to the corporate powers and the insatiable need for all out profits.

      • Companies are answerable to shareholders who generally want to maximize profit. Take a look at apple and it’s complex tax affairs worldwide…

  2. Given that real estate costs are even higher in Bellevue and that city is not immune from the same economic pressures that are forcing localities to find new revenue sources, it seems unlikely that many businesses would move to Bellevue just to avoid a comparatively minor tax. Any that would are clearly not good corporate citizens, and Seattle doesn’t need them.

  3. The bill also creates a tax court, with its own powers to directly examine a long list of company records.
    They can come on premise and require a company to produce for inspection or examination of all sorts of company records ( a company has no right to a hearing in front of a Superior Court Judge ( I am sure they will make their own right to appeal decisions ).
    In the bill, there are legal penalties for not the allowing the tax court directly on premises ( where ever they are ), look at records, and force someone to appear in front of them.
    Congress cannot get Bezos to appear, but I guess Seattle now can!
    They have also incorporated previous taxes into the creation of the Tax Court. (5.55.220)
    This is far from being just a “Tax Amazon” law.
    I would think that the “Sweet Beverage industry” would be taking notice of this as well, since the tax court mentions them as well.
    And 5.45, so that means any business that needs a business license in Seattle?
    No wonder the Mayor has been saying that it will take some effort to put all of this new administration in place.

  4. Amazon should just move. After all they’ve done for this city, bringing hundreds of thousands of jobs and incredibly prosperity, the city council is openly hostile to them and continues to make legislation specifically attacking them. The city council continues to paint Amazon as an enemy of the city in their rhetoric. And the people of Seattle, in an election that was essentially a referendum on Amazon, voted in 6 out of 7 races to send these people to the council.

    Amazon has given everything to this city, and we hate them for it and want them out. They should just give us what we asked for. Just like when the SPD gave CHOP what they asked for. Let us learn the hard way how stupid we are.

    • What exactly has Amazon given us, other than stratospheric housing costs and displacement of low-income residents? Seriously, compared to the likes of Microsoft, Boeing, or even Starbucks, their corporate philanthropy has been piddling. I for one wouldn’t mind if they left. But they won’t, because too many of their highest-paid, hard-to-replace employees chose it precisely for its current location. They would not be happy about having to commute every day to Bellevue or wherever. No tax plan is without flaws, but this is a good start and I hope it passes. Seattle NEEDS this money.

      • Housing costs are stratospheric because everyone wants to live here. Why does everyone want to live here? Because we have so much nice stuff. Why do we have so much nice stuff? Because of all the Amazon money flowing around. That’s how an economy works. Amazon pays an engineer $500,000 a year, and that engineer goes out and patronizes fancy restaurants, upscale bars and wineries, the theatre, our local music venues, and other artistic and cultural offerings in this city.

        If living in Seattle wasn’t worth the stratospheric cost, people wouldn’t live here. In the 90s, before Amazon came to town, everyone was leaving Seattle and nobody wanted to live here, even though costs were far lower than they are now. Remember the “turn out the lights” billboard?

        Don’t worry though, I’m sure if we get rid of Amazon and Microsoft and Boeing and Starbucks and run all their highly-paid employees out of town, all the cultural offerings we’ve been blessed with will definitely continue to exist. Great places like Bar Cotto and Hot Cakes and Dingfelder’s can make all their money from the junkies hunkered down in Cal Anderson Park.

      • Not completely true. I used to work under contract at several of the Amazon buildings in the Denny Triangle, and South Lake Union. There were a very large percentage of immigrants from places like China and India. Most of them who have kids chose to live on the Eastside. From Bothell to Bellevue, they chose these suburban communities for the excellent public schools system. A very large segment would love for Amazon to locate all their offices there. Most of those that do live in Seattle are single adults with either no children, or those too young for school. Not all, but a very large percentage. All one has to do is look at the 2018 demographics of Seattle compared to places like Bellevue or Redmond.

      • Well, I can’t afford to patronize any of the places you mentioned, so their disappearance would be no great loss to me. But my point is, Amazon isn’t going anywhere. In Bellevue they would quickly face the same pressures to pay their fair share for addressing the externalities their presence would create. They’re not leaving Seattle — they already tried to bluff us once with that HQ2 nonsense, remember? — and this is not an onerous tax in any case. The savings from the federal corporate income tax cut alone would pay it many times over, if Amazon even paid income tax in the first place. It never ceases to amaze me how many people in this country seem to think that big business should be excused from all social responsibility no matter how predatory their behavior.

      • “What exactly has Amazon given us, other than stratospheric housing costs and displacement of low-income residents?”

        Don’t blame Amazon; this is on the back of the city council not giving a single f**k to provide affordable housing. If you want to learn what our future looks like if we don’t fix this? All of our streets will look like the CHOP. If that doesn’t scare the hell out of you, then you might want to re-examine your priorities. The city needs better leadership, a more fair tax structure, affordable housing, access to health care (physical and mental) and excellent education. There’s only one way out of this and that is equity for everyone!

      • Great, you don’t patronize any of these places so they’ll be no great loss. Why stop with the places I listed? Seahawks tickets are expensive, let’s tear the stadium down. Going to Benaroya Hall is expensive, let’s tear that down. I’m never gonna be able to afford to eat at Canlis, let’s burn it down. I bet the new hockey team tickets are gonna be expensive. We could just kill that project right now and redistribute the money to build more sheds for Utah’s heroin addicts.

        And blaming the homelessness crisis on Amazon has always been some sort of sick joke. As though these junkies can’t afford $1500 a month for an apartment, but they could afford $800 a month. News flash: These vagrants can’t afford an apartment here no matter how cheap it is. Neither could they afford an apartment in any of the cities they came from. They have no money and no source of income other than what they can steal. The reason they all go to the west coast is because you can sleep on the street in the winter here, while you can’t in Kansas City or Chicago. They could all go to Yakima if affordability was actually an issue.

    • From a few sources, Amazon is considering allowing permanent work from home. This will be one way to avoid the tax, as their employees move across the country

  5. On a positive note it beats increasing my property tax by another 12%.

    Seems like it’s going to be complex to admin if tax is based on employee domicile ? Or will AMZ pay people to relocate to Bellevue to avoid it…

  6. Given the difficulties around income tax in WA and the desire for the Council to raise more tax revenue from higher income/wealth individuals only, maybe they could explore a graduated sales tax. Much of the infrastructure is in place for this, speeding implementation time and reducing new overhead.

    Say, charge a modestly higher sales tax only to people with an income above a certain threshold, or place higher sales tax only at stores that sell higher end items more likely to be purchased by high income/high wealth individuals.
    The way to administer the first option would be to increase city sales taxes across the board and then issue a “sales tax discount” card to residents each year based upon a person’s federal tax return that would reverse the increase on the spot when displayed or scanned. People who live outside of Seattle would not be eligible for discount cards, because they already get a free ride by not paying for real estate tax (either directly or via rent.)

    The last such sales tax increase by the Council (the soda tax) was deeply regressive with a negative disparate impact on low income and minorities, but maybe they could craft a more progressive version using this approach?

    If that it too close to an “income tax” to pass muster, then just have a higher sales tax on luxury non-essentials such as clothes above a certain price point, meals over $25 per person, Kombucha, Avocado Toast, Golf Clubs, and high end cellphones. Place rent surcharges on apartments above $2,500 and service taxes on premium treatments (haircuts over $50, botox, tattoos, etc.)

    If the city is in dire straits for tax revenue, the fasted source is via sales taxes. Being creative, they can be structured to be progressive as well!

  7. Just put the damn tax on the ballot already and let the public vote for it. If there’s really a desire by John and Jane Q Public to “Tax Amazon” then it should pass handily. If not, then we can finally move past this argument that’s gone on for far too long.

  8. Woohoo!!!! Everett is looking better and better- Port, large airport, I-5 corridor, free parking still…. all the benefits of Seattle area without the BS.

    • No kidding. Everyone keeps mentioning Bellevue and the Eastside like it’s their only choice. Doesn’t anyone remember the outcome of their HQ2 fiasco, when they chose Long Island City and everyone went ballistic and started with the hands out, so they said “screw it” and headed to Virginia? They don’t just have Seattle or Bellevue. They’ve got Everett, Tacoma, and yeah, anywhereTF else they want to go that will welcome them without all the bullshit. They can and will blow off Seattle and Bellevue and anywhere else that starts in on them. How much proof do you need? BTW, try Googling “Amazon HQ2 Virginia”. They’re moving right along without Long Island City, and they’ll do it again if they have to. Don’t believe it? Keep it up and watch see happens.

      • Look, the point about Amazon is they are going to encounter pushback wherever they go, because they are an intrinsically predatory company. It took a while to develop in Seattle but it happened immediately in NYC. It will happen in Virginia too, I guarantee it (and VA is not HQ2 as originally conceived as equal to Seattle — that preposterous idea has long been abandoned). People everywhere in this country want a new social contract on the other side of this pandemic, one that redefines what is a reasonable profit and a fair wage (and has no room for anyone to amass 12 figures’ wealth while paying their front-line workers poverty wages). There’s nowhere to hide from this paradigm shift. Not Bellevue, not Virginia, not anywhere.

      • THey ‘ve been expanding nicely in Nashville and really leaving Seattle in increments. Seattle is too expensive , too communist and they will just lose money staying in that cesspool. Amazon is really distributing its operations. It’s headquarters are just for decor. It’s not just Amazon who is affected. Starbucks will bail, f5 will bail and many others.

    • If that’s all you know about Everett, you are in for a rough ride indeed. Hope you like tweakers. And if you work in Seattle, enjoy that twice-daily two-hour commute.

      There are good reasons why Everett has neither grown nor gentrified much in the past decade. (Hint: It’s not because people don’t know it exists.)

    • Yes, that makes tons of sense. Get someone – who exactly is going to pay this tax anyway? to pay as much or more? in taxes than they actually make in what? – salary? profits? poker chips? Because we all know how motivating it would be to work for nothing.

      Yes, that would work wonderfully and I’m sure the people or companies (or gnomes or whomever) paying this 100% tax would definitely stick around to bask in the heartwarming glow of knowing that everything they were working for was being equitably redistributed – heck after having all of it taken, they might just qualify to get something back so that they’ve got a ration coupon actually get the toilet paper or boots or sausage or whatever they find is at the end of the line they’ve been waiting in….

      Yes indeed…. lets do that.

  9. This tax proposal seems like a reasonable compromise between Sawant’s much more punitive version, and doing nothing. And compromise is what democracy is all about.

  10. While much of the focus is on Amazon I don’t really think this is much of a concern for them at all. If I recall under Sawant’s original proposal they would pay under $50M per year so Mosqueda’s would be even less. They could easily offset that by reducing benefits to lower wage workers or outsourcing work in another part of the country. I think where you will see real changes are smaller professional services firms with highly compensated employees (think legal services, accounting offices, medical administrative offices). Smaller firms like these do not need to be in a specific jurisdiction and it is easy for them to move once their leases come due. I talked to someone who works for a home construction company and they are already planning to move from Fremont to Bothell. It really is disingenuous for the council to pretend there will be no blowback from the business community for this tax. In some ways it is better that they pass it now though as by the time the next election comes due for the district representatives in 2023 we’ll have a solid 2 years of data to see how this tax has impacted both the business community and if it has made any dent in the affordable housing crisis. Of course the latter should not be an issue since the council has a great track record of keeping city depts accountable for goals and taxpayer money, except for the move seattle levy, the city streetcar, Share/Wheel, the pronto bike share program…..

  11. Others mentioned it, and it’s true: this is a tax on payroll for Seattle residents, whether or not their office is in Seattle:
    5.38.020 – Payroll Expense is for : 3. The employee is not primarily assigned to any place of business for the tax period, the employee does not perform 50 percent or more of their service in any city, and the employee resides in Seattle.

    If the Mayor and court don’t shoot down this horrible idea, then we have to just move out of Seattle. We’re owners of the company we work for … why would we want the corporation to pay more tax just to make the sociocommunists happy?

    They want corporations under public control.

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