Income tax trump proof seattle 071017 tp5web

Seattle council members on Friday released details of a $75-million-a-year head tax proposal that makes drastic changes on the task force recommendations and goes big on taxing the largest 3 percent of the city's companies. 

The new council bill would enact a 26-cent tax per hours worked on businesses with $20 million in taxable gross receipts to start with. After two years, the city would transition into a 0.7 percent payroll tax instead, as a response to concerns about its effect on businesses with low profits.

About three-fourths of that money would go into housing—with the new tax, the city estimates it would build 1,780 units of housing total in the next five years. The rest would go toward emergency support services for homelessness. On top of that, the city has plans to use its bonding capacity for another $125 million ($25 million a year). The city would pay the bond back over the course of the next 20 years, with $2 million a year in debt service. 

"We’re (not just) endeavoring to create more units to put them in the market," council member Lorena Gonzalez told PubliCola. "This is specific types of housing for a specific type of population that is really at the heart of the homelessness crisis."

Here's a breakdown of the new construction:

  • 935 units serving 30-60 percent of average median income (AMI), 
  • 400 units serving 30 percent of AMI,
  • and 445 units serving 0-30 percent. 

The revenue would also fund operating and services support for 445 more units for the lowest 30 percent of the income bracket. Council members explained the large focus on housing over homelessness services addressed an immediate need for homeless residents to transition out of shelter living and into low-income housing.

But despite what council members said was a plan adjusted from roundtable discussions with opponents, businesses are still fighting the proposal; the Downtown Seattle Association and Seattle Chamber of Commerce released a joint statement Friday saying that the proposal raises taxes on businesses again—who say they contribute more than half of Seattle's general fund revenue—without solving the homelessness crisis. They criticized the plan for not including funds for behavioral health, substance abuse, or employment opportunities.

"This proposal is yet again another plan to tax and spend without a clear plan to address homelessness," they said. "The current reality on the streets of Seattle clearly shows the City Council's approach to the biggest crisis facing our region has been inconsistent and ineffective." 

The tax would leave much of the burden on Amazon, which has more than 45,000 employees in Seattle and would contribute an estimated $20 million a year. Council member Kshama Sawant, who didn't help craft the legislation but has been calling for an Amazon tax for years, declared that her movement was "on the verge of winning a historic victory."

The head tax during budget season last fall narrowly failed with a 5-4 vote on the council. With Gonzalez, a former "no" vote on the tax last year now on board, the tax this time around likely won't come across many barriers. Gonzalez helped craft the legislation and co-chaired the task force that made the recommendations for the tax. 

For months, Seattle Mayor Jenny Durkan has been silent on the tax and whether she'd support it. She opposed a head tax during her campaign and said it would lead to unintended consequences. But in a letter she submitted to council this week, she took a more amenable approach

"I have not heard Mayor Durkan say, 'I’m prepared to solve homelessness and the housing crisis without any additional resources,'" council member Mike O'Brien, who proposed the original head tax in the fall, said to press Friday. "She is going to have $75 million extra money to try to solve homelessness and affordable housing next year. And if I were mayor, even if I weren’t excited about this tax, I would be excited about the opportunity to make some new investments."

Council members would need to pass both a council bill to implement the tax next year and a resolution on a five-year spending plan.  

Updated 10:45am on April 23, 2018, to include more details on the units to be constructed and comments from businesses and Sawant.