Councilmembers to talk head tax at Capitol Hill Chamber roundtable

Seattle City Councilmembers Lisa Herbold and Lorena González will join the Capitol Hill Chamber of Commerce on Friday, May 11, for a roundtable discussion of a new head tax being proposed to fund housing and homeless services.

Councilmembers Mike O’Brien and Teresa Mosqueda joined Herbold and González in releasing their proposed legislation on April 20, which would establish an employee hours tax on the city’s largest businesses from 2019 through 2020. That head tax would be replaced by a payroll tax in 2021. The legislation is expected to generate $75 million in new revenue annually.

The council bill being proposed deviates from recommendations in a March report made by the Progressive Revenue Task Force, headed by González and Herbold.

The task force had recommended a “skin-in-the-game” tax for businesses that would be exempt from the employee hours tax, but the councilmembers didn’t include that in their legislation, having heard concerns from the mayor’s Small Business Advisory Council and other small business owners.

The legislation calls for employers to pay $500 per full-time equivalent employee — about 26 cents per employee per hour — plus 26 cents times the hours worked by part-time employees in Seattle.

Businesses that would be affected by the head tax are those that make more than $20 million in taxable gross receipts in Seattle, and would not include gross revenue a company generates outside the city.

A Central Staff review of the legislation finds that the threshold is higher than the city’s business and occupation (B&O) tax, which 22,703 Seattle businesses paid in 2016. Only 3 percent (585) of those businesses would be required to pay the new employee hours tax.

The legislation also includes exemptions for nonprofits and those entities the city doesn’t have authority to tax, such as the state and federal government, insurance businesses and businesses that only sell or distribute motor vehicle fuel and liquor, according to a Central Staff memo.

A proposed payroll tax that would indefinitely replace the head tax in 2021 would require employers to pay 0.7 percent times the total payroll paid to all employees working in Seattle.

The revenue generated by the taxes are proposed to be divided, with 75 percent going to the Office of Housing to fund affordable housing construction — 1,780 new housing units are expected to be created in the first five years — and 20 percent to the Human Services Department for homeless services and emergency and temporary shelters — about 362 beds annually. The remaining 5 percent would cover the costs of administering the tax.

The Capitol Hill Chamber of Commerce roundtable discussion will take place 8:30-9:30 a.m. Friday, May 11, at The Elliott Bay Book Company, 1521 10th Ave. Click here to RSVP.