Seattle City Council expected to pass largest tax on businesses in Seattle's history

The Seattle City Council is on the verge of passing a historic tax on businesses. On Wednesday, in a 7 to 2 vote, the council approved Teresa Mosqueda’s new tax bill during a committee hearing. The final vote on the ‘Jumpstart’ tax is expected on Monday.

If it passes, it will be the largest tax imposed on businesses in Seattle’s history.

“Right now they are trying to survive rather than expand and make a lot of money,” Eugene Wasserman with the North Seattle Industrial Association said.

Wasserman said imposing a new tax right now will have detrimental impacts to jobs and recovery.

“There is a real recession here and the council needs to recognize that,” Wasserman said.

The majority of Seattle City Council members said the more than $300 million budget shortfall due to COVID-19 is why Teresa Mosqueda’s tax measure should pass.

“We know this bill alone will not close the gap that we need,” Mosqueda said.

Mosqueda said they can start investing in immediate COVID-19 needs and also earmark funds for housing and homelessness. The money needed immediately will come from the rainy day fund.

The tax would be collected starting in 2022.

The measure will impact hundreds of Seattle companies and supporters stress that it will largely impact big companies like Amazon and Starbucks. But the business community who sent a letter to city council said it will also affect mid-sized companies.

Nearly a dozen organizations representing thousands of companies strongly opposed Mosqueda’s tax bill.

The organizations said Seattle has felt the economic effects of COVID-19 longer than any other metro area, adding that the impacts to Seattle’s economy are much more severe than what happened during the Great Recession.

Business leaders say Seattle’s current unemployment rate is 14% with 80,000 jobs lost in Seattle since March compared to 5,000 over two years during the great recession.

They are urging council to focus on recovery and getting businesses back open.

The majority on council say a progressive tax is needed especially during these times due to the massive budget shortfall and the growing inequities.

Mosqueda’s bill would impact all businesses with $7 million in payroll and most impacted by the tax will have to pay .7% on any employee making $150,000 or more.

The tax rate increases as the income increases.The payroll tax is now expected to generate around $215 million a year.

For perspective, 2018’s controversial head tax on businesses would have generated up to $50 million a year. The head tax was approved but repealed after public backlash.

“Most of these businesses are not Amazon, no matter how large they are and they are not doing well right now, the lack of recognition is really disturbing to people,” Wasserman said.

Many who called in to Wednesday’s public meeting disagree with Wasserman and support a tax structure even more aggressive than Mosqueda’s plan in support of Kshama Sawant.

For years now, Sawant has been fighting to pass her ‘Tax Amazon’ initiative. Sawant’s measure would have impacted 800 businesses, taxing them on all employees instead of just high earners.

Sawant’s bill aimed to generate half a billion dollars a year and it is supported by Council Member Tammy Morales.

“Saying no to large corporations that’s not hard for me,” Morales said.

“The mayor has said the budget cuts are unavoidable it’s absolutely dishonest and unconscionable in a city as wealthy as Seattle” Sawant said.

The majority of council does not support Sawant’s initiative.

As a compromise, Mosqueda’s measure was amended to tack on an additional $40 million to the original proposal. 

But Sawant said the fight is not over.

“Nothing stopping them to change it from a year or two because they found a new crisis, when they ask where all the businesses have gone we will be glad to tell them we were forced out by city government,” Wasserman said.

Other amendments that passed in committee include getting rid of the 10 year sunset clause, that means the tax does not expire unless King County or the state imposes the same tax.

Two council members who voted against Mosqueda’s tax bill are Alex Pedersen and Debora Juarez. Instead they tried to get the payroll tax on the November ballot but their amendment failed.