Revised business tax for housing and homeless services heads to City Council

Late last week, four members of the Seattle City Council announced a revised proposal to tax around 3 percent of Seattle’s highest-earning businesses—the result of a task force convened after a similar effort last year.

During the 2017 city budget process, city councilor Mike O’Brien proposed an employee head tax that would have increased funding for both housing and homeless services. The measure ultimately failed, but the city council passed a resolution to pass legislation by the end of March 2018 to address the same funding need and convened a Progressive Revenue Task Force to make recommendations.

It’s about a month past the goal line, and a new measure—this time sponsored by not only O’Brien, but fellow city councilors Lorena González, Lisa Herbold, and Teresa Mosqueda—is poised to wind its way through City Council, emerging from months of pressure from housing advocacy groups and hand-wringing from Seattle business leaders.

Under the new proposal, only businesses making $20 million a year or more in taxable income would be subject to the tax. It would start in 2019 as an hours tax, where businesses affected would pay an additional 26 cents per hour for each employee working in Seattle—or an even $500 a year per employee. (We’ve reached out to clarify what this means for salaried employees and will update when we hear back.)

Eventually, by 2021, the hours tax would be eliminated and replaced with a 0.7 percent payroll tax, so those businesses would be paying more on higher-salary positions.

Last week’s proposal eliminates or mitigates some controversial ideas being tossed around for a head tax. It doesn’t include a “skin in the game” fee for smaller businesses—so only 500 or so of the largest businesses in Seattle pay anything at all. It also doubles the revenue threshold proposed by the task force from $10 million to $20 million.

Both the hour and the payroll tax are expected to raise around $75 million a year. Around 75 percent of that would go towards building affordable housing, according to city documents.

Another 20 percent or so would go to the city’s Housing and Human Services department to support various outreach programs, including tiny houses, emergency shelters, public health response, and workplace stability to reduce turnover in service providers. Around $3.5 million of that money will go toward “safety in place” measures for people who haven’t been able to find housing, including garbage disposal, portable bathrooms, and black water removal.

The remaining money would go toward administrative costs, which would be higher during the first year but would be cut by more than half by the third year.

In the first five years of the tax, the goal is to have built more than 2,000 affordable housing units for people making 0 to 30 percent or 30 to 60 percent area median income (AMI), add 362 shelter beds, provide support for two additional encampments, and build 100 tiny homes. Other benchmarks for the first five years include a mobile health van, picking up 500,000 pounds of garbage, and creating five hygiene centers.

Seattle Metropolitan Chamber of Commerce, which has expressed opposition to any kind of employee head tax since the original version introduced by O’Brien, says there’s “no plan” for the tax and questions the council’s accountability to homeless services. And it’s not the only business group to come out against the tax.

“The business community respectfully declined to participate in the task force because it was simply a justification by the City Council to establish a new tax on jobs,” wrote representatives of Downtown Seattle Association, the Chamber, and the Greater Seattle Business Association in an editorial for the Seattle Times last week. “The outcome was predetermined, the process rushed, and its goal was simply to raise more money instead of truly solving the homelessness facing our region.”

The editorial points to an increase in city spending, but questions what the city has used the money for in addressing the homelessness crisis, and argues that the city should wait for recommendations from Mayor Jenny Durkan’s One Table group to decide if more revenue is needed.

A fact sheet distributed by City Council seems to address this criticism: “Local government funds housing and services for thousands of people experiencing homelessness each year, but the need is growing faster than we can keep up with,” reads an infographic. It adds that there’s a two-to-three-year “lag” between affordable housing being funded and becoming available, including the 2,600 units of affordable housing under construction right now.

While business groups have been poised to oppose this tax for months, some advocacy groups have, at the same time, been eagerly awaiting the proposal.

“For too long our city and county have been trying to end homelessness without truly reckoning with the affordable housing shortage” said Katie Wilson, general secretary of the Transit Riders Union, in an emailed statement on Friday. “All the navigation teams and navigations centers in the world aren’t going to help people out of homelessness if there is no affordable, accessible housing for them to move into.”

Tiffani McCoy, lead organizer at Real Change, also supported the legislation in a statement—and praised the current draft for leaving small businesses out of the tax. “The idea of everyone having skin in the game is a nice one,” said McCoy, who also noted Seattle and Washington State’s regressive tax structure. “We desperately need new, sustainable, dedicated revenue to build up our affordable housing stock, and this revenue should come from those most able to contribute like Amazon and the biggest businesses.”

The ordinance could go to a full council vote on May 14, and City Council has scheduled several public meetings that are sure to be packed—including one on the evening of Monday, April 23.

• Progressive Tax on Business [SCC]