As the Seattle City Council’s Finance and Neighborhoods Committee met March 14, an older man in plaid started seizing in his seat.
It all unfolded as the City Council listened to public testimony on an employee hours tax, which would fund housing and homeless services. In the midst of public comments, a commotion broke out in the packed audience.
“We have to call 9-1-1. He’s having a seizure.”
Two people lifted the seemingly motionless body of a man that advocates say is currently experiencing homelessness. He did not appear to make any attempt to stand.
The episode was shocking, dramatic and exemplified why the people in the room carried so much passion for the employee hours tax, a proposed duty on businesses in Seattle that would be used to fund housing and homelessness services at a time when the crisis of homelessness continues to grow.
The tax has not yet been approved and will take months of dialogue to craft a final proposal to go before the full City Council.
What is it?
In broad strokes, the proposal is for an employee hours tax, a charge levied either per full-time employee or as a percentage of payroll. The goal is to create a new, progressive source of revenue to address the housing and homelessness crisis. It’s an alternative to regressive sales and property taxes that disproportionately fall on people in the lowest income brackets.
A study from the left-leaning Institute on Taxation and Economic Policy found that the wealthiest 20 percent in Washington paid 2.4 percent of their income in taxes in 2015; people in the lowest paid 16.8 percent.
Since that study, policymakers have only added to that burden by increasing fees and taxes that weigh more heavily on people in lower income brackets, such as the sugary drinks tax. Hikes in property taxes will also compound problems for people trying to get by.
In the absence of a graduated income tax or capital gains tax, Seattle electeds had to get creative in order to raise revenues without hurting the homeless people they are trying to help.
That led to a pitched battle during the 2017 budget cycle. City Councilmember Kirsten Harris Talley, Councilmember Mike O’Brien and the Housing for All Coalition tried to push through an employee hours tax as the full council drafted the budget.
Some called the process rushed, while others said that the urgency of the situation called for decisive action — both were right.
In a bold gambit, Councilmember Lisa Herbold linked the employee hours tax to $12.95 million in funding for homelessness services. It failed, throwing the budget process into disarray.
Everything old is new again
Actually, Seattle has been tussling over a tax in this form for the better part of a decade.
In 2011, Katie Wilson and other advocates joined up to fight bus service reductions on King County Metro lines. She called it the origin story of the Transit Riders Union, which supports equitable taxation.
They discovered that King County had the power to implement a small employee hours tax, but that it would have to go on the ballot, a heavier lift.
But the city had done it before.
Between 2006 and 2009, Seattle implemented a modest employee hours tax to pay for certain transportation-related costs. The tax was light — $25 per employee per year — but riddled with loopholes that made it difficult to implement for the employers. The city didn’t raise huge sums, an estimated $5 million per year. It was repealed as the Great Recession took hold.
Though the proto-Transit Riders Union team did not manage to push a tax through, it’s been on its radar since.
Today’s effort looks far closer to passing and will be a better measure than the one proposed during the budget cycle, Wilson said.
The current proposal is three-times what was proposed during the City Council budget cycle and includes input from organizations that will be building the housing to create a good spending plan, Wilson said.
“It’s a major new investment, and it needs to be effective,” she said.
Enter the taskforce
In 2017, the Seattle City Council convened The Progressive Revenue Taskforce to address the question of an employee hours tax. The group met five times over roughly two months, with split-out groups conversing in the interim to come up with ways to raise and spend the money brought in by the potential tax.
To build the amount of deeply affordable housing needed to end homelessness, local government would have to put in between $3.4 billion and $5.1 billion over the next 10 years. That’s on top of state and federal funds that they hope to get, according to the report.
The group never intended this tax to get near those kinds of numbers.
The taskforce reverse-engineered their proposals beginning with a $75 million figure, over the objections of the more radical wing of the Housing For All coalition, of which the Transit Riders Union and Real Change are a part, that wanted to double the amount.
The report gives three basic options: a tax on total payroll, a fee on each full-time equivalent employee or a mix of the two methods.
In each case, the rate is set by the number of full-time equivalent employees. Larger companies would pay a higher rate.
Firms with gross revenue below a certain amount — $8 million or $10 million, depending — would pay a flat “skin in the game” fee. Those companies making under $500,000 in gross revenue would be exempt.
The report doesn’t stop there. The taskforce recommended alternative ways to come up with the other half of the $150 million figure: a local estate tax, tax on high compensation, asking the Legislature for the authority to tax real estate sales and a fund that collects an increment of property taxes associated with new construction.
The recommendations were hailed as unanimous when presented to the Finance and Neighborhoods committee on March 14. Lisa Daugaard of the Public Defender Association said that it had taken hard work and compromise to get everyone to sign off of the final $75 million figure.
“Everyone, or many people, had to push themselves to find a package that they could, with integrity and commitment support,” Daugaard said. “That is this. It is $75 million.”
There does appear to be some dissension in the ranks.
The progressive wing — represented on the council by Councilmember Kshama Sawant — isn’t pleased with the decision to stop at $75 million.
“I’m advocating for a $150 million tax on big business. I know majority of activists are also advocating for that,” Sawant said.
The more centrist councilmembers appear to be trying to thread the needle between what is necessary and what they believe is possible. Already business opposition is growing: 301 small businesses signed a letter calling on the City Council to slow their roll.
The Seattle Metropolitan Chamber of Commerce is continuing that push. In an email posted to Twitter by Crosscut reporter David Kroman, Marilyn Strickland, the president and CEO of the chamber, insists that the City Council view the crisis as a regional problem rather than add to the considerable amount of money already spent on the crisis.
The opposition seemed to sway Councilmember Sally Bagshaw, who asked for an economic analysis of the proposed tax because there “is not unanimity in the community that we need this investment.”
The economic impact seemed clear to many at the table — most businesses would pay roughly $400 a year total for the tax, while roughly 5 percent would be hit by the per-employee or percentage payroll charge. But Bagshaw was insistent.
“I still want the economic analysis. Here’s what it costs, here are the benefits we’re getting,” she said.
Wilson knows that the fight for the tax is not over. There are months’ worth of work left to do, including a campaign to educate small businesses about the tax and collect signatures in support spearheaded by Seattle ACED, an artist group.
But it doesn’t look as though advocates are losing steam.
Bri Little, a member of the taskforce and advocacy associate at Real Change, took the podium during public comment to express her anger over the deprioritization of marginalized voices and the need for resources to help Seattle’s residents.
“I don’t believe anyone’s life should be a game of politics. We should demand as much as we need,” Little said. “Our action or inaction has life or death consequences for the people who actually built this city.”
Ashley Archibald is a Staff Reporter covering local government, policy and equity. Have a story idea? She can be can reached at ashleya (at) realchangenews (dot) org. Twitter @AshleyA_RC
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