Progressive Tax on Business

Seattle Council Passes Tax on Business to Help Address Homelessness

Following more than five months of deliberation, the Seattle City Council passed an ordinance related to taxation, intended to help address homelessness.The amended proposal establishes an annual tax of $275 per full time employee on the City’s largest businesses, those with revenues of more than $20 million  (about 3% of all businesses). The measure would generate an estimated $47 million annually and end on December 31, 2023.

The ordinance passed by a unanimous vote, with all nine councilmembers supporting it.

Selected highlights of the amended ordinance include:

• Exempt Seattle’s small and medium-sized businesses, only applying to those with at least $20 million or more annually in taxable gross receipts as measured under the City’s existing Business & Occupation tax;
• Apply only to the City’s approximately 585 largest businesses, or approximately 3% of all Seattle businesses;
• Require large businesses to pay $275 per full-time equivalent employee working 1,920 hours per year (or about $0.14 per hour);
• Include an evaluation of the economic impacts, and an independent oversight committee; and,
• Exempt healthcare providers that provide at least 25% of their services to patients covered by Medicare and Medicaid as well as all hospitals.

Council President Bruce Harrell (District 2 - South Seattle), said, “In every policy or fiscal decision we make, we have to look at the impact on jobs. Our goal is to have a successful and vibrant business community–one of the best in the country–and at the same time, assist our most vulnerable and strategically invest in affordable housing. One does not exclude the other. Our investment strategy must balance these objectives without demonizing advocates or businesses. Today, we have reached a compromise that accomplishes this goal.”

Harrell continued:  “I did not support the spending plan, because our strategy must leverage the expertise and resources in real estate, software applications and other areas to make sure we gain the trust of the public in how we invest funds from this new revenue stream. This legislation is currently designed for a finite period to address the affordability and homelessness crisis. How we spend the money becomes critically important–residents, members of our business community and advocates should be afforded the opportunity to weigh in.”

Councilmember Sally Bagshaw (District 7 - Pioneer Square to Magnolia), a co-sponsor of the legislation and Chair of the Finance and Neighborhoods Committee said, “Since Seattle declared a state of emergency around the homelessness crisis, people have told us they want to see action, action that means people out of tents and in safer, healthier spaces, and cleanup of the public spaces in our neighborhoods. They also want more state and local funds for mental health and behavioral health improvements. This tax contributes toward the long-term solution of affordable housing, while giving immediate attention and resources to fund shelter services, so those living on the streets tonight can find a dry, warm and safe place to stay. I’m pleased my council colleagues also agreed to exempt hospitals and non-profits from this tax, recognizing the vital work they do in our community serving those on Medicare, Medicaid, and other vulnerable populations.”

Councilmeber Rob Johnson (District 4 - North Seattle), and a co-sponsor of the legislation said, “Any solution to help address our homelessness crisis must produce immediate results and protect the long term economic health of the city. Today’s action creates more affordable housing, addresses immediate needs of those living unsheltered and has a five-year sunset so we can effectively measure our efforts. I want to thank my council colleagues for this collaborative effort and for the engagement of non-profit organizations, faith and civic leaders, businesses, labor, affordable housing developers and community members.”

Councilmember Debora Juarez (District 5 - North Seattle), and a co-sponsor of the legislation said, “I want to see results from this tax, which means fewer people living on the streets and more people in shelters and permanent housing. Now it is time for regional partners and the federal government to join Seattle in taking bold actions to address homelessness.”

Councilmember Teresa Mosqueda (Pos. 8 - Citywide), said, “Today, we took an initial step forward to reduce homelessness, build safer communities and toward a City that allows people who work in Seattle to afford to live in Seattle.  We have a homelessness and housing affordability crisis in Seattle, our shelters are at capacity and there is not enough affordable housing for folks to move into. Today’s progressive tax proposal and corresponding spending plan provides a significant down payment toward the housing our community needs. Our City is growing rapidly, and we must respond with urgency, compassion and leadership.  I look forward to continued collaboration with the community and my council colleagues to ensure we build more affordable, sustainable, and equitable housing for our city.”

With no state income tax, Washington is routinely ranked as having the most regressive tax structure in the nation.  Earlier this year, property taxes were dedicated by state lawmakers to fund education shortfalls; a B&O tax would require voter approval and spread the burden across all industries, including small business.  Other taxation options such as a tax on utilities would adversely affect rate payers, many who are on fixed incomes.

The legislation will take effect in January 2019.

Infographic of the Original Proposal

Download a PDF of the infographic of the original proposal , thumbnails below:

Resources

• View the final ordinance (the tax), amendments and supporting documents
• View the final resolution (the spending plan), amendments and supporting documents
• Final Proposed 5 Year Spending Plan
• Original Resolution
• Original Bill
• Original Proposed 5 Year Spending Plan
• Infographic of the original proposal
• Performance Standards
• Detailed Information on Affordable Housing Inventory and Services

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