Council passes reduced employee-hours tax

Update: Seattle Mayor Jenny Durkan signed the legislation on Wednesday, May 16. There was no media event for this signing, as there have been with other legislation in the past.

After copious meetings and negotiations, the Seattle City Council on May 14 reached a compromise for an employee-hours tax for affordable housing development and homeless services.

The approved head tax will affect businesses reporting more than $20 million in taxable gross receipts in Seattle, and comes out to roughly $275 per full-time equivalent employee. It is expected to raise $47 million annually, and will sunset in 2023. About 60 percent of the revenue will go to creating deeply affordable housing, and about 40 percent for homeless services, with an emphasis on programs that get people into emergency and temporary housing.

When the city council was considering a head tax last year, councilmembers were unable to agree on an employee-hours tax of 6.4 cents per employee per hour, which would have generated about $25 million annually.

The council convened a 17-member Progressive Revenue Task Force, which in March published a report calling for an EHT that would raise at least $75 million. The task force wanted the council to use other potential progressive revenue sources to generate an additional $75 million.

District 3 Councilmember Kshama Sawant had been rallying for a head tax that would raise the full $150 million, but was never able to garner enough support from fellow councilmembers.

The council voted 5-4 on Friday, May 11, to advance a $75 million head tax for consideration on May 14, but then Mayor Jenny Durkan made it clear she would veto such legislation. The council would have needed an additional councilmember to change their no vote to a yes in order to prevent a veto.

Durkan had proposed halving the proposed $500 per employee head tax, and council president Bruce Harrell floated legislation with similar language on Friday, but that didn’t get enough support.

The mayor, councilmembers and city staff spent the weekend working on a compromise that everyone could agree on.

Councilmeber Lorena González came forward on May 14 with the amendment that reduced the tax to $275 per employee, which she said was in line with “political realities.”

González said she was pleased to have the support of almost every councilmember — Sawant did not support the amendment, but ended up voting in favor of the tax — but disappointed she couldn’t find support for more.

“We have to massively scale up the number of deeply affordable housing units that are available to those that are living and suffering here on the streets of Seattle,” she said.

Under the approved head tax, 591 units of mixed-income housing and permanent supportive housing are expected to be created in the five-year spending plan.

There will also be $14.6 million in workforce stability funding over five years, providing a 4 percent raise for direct service homeless contracts.

Sawant was unable to get an amendment passed that would have prohibited any of the EHT revenue from being used to sweep homeless encampments

Councilmember Teresa Mosqueda said she also doesn’t support sweeps, but didn’t feel the amendment supported the unified message they had sent with their vote on the tax.

“If sweeps need to stop,” Sawant said, “then take a stand that sweeps need to stop.”

The head-tax debate has been extremely divisive, with opposition questioning the need for more revenue for housing and homeless services, saying the city should do a better job of spending the funds it already has.

Speak Out Seattle cofounder Elizabeth James said her group wants an independent audit of all city departments, and for the city to better support law enforcement and funding for drug treatment and mental health services.

Supporters of the head tax, such as members of Sawant’s Socialist Alternative group and the Transit Riders Union, asked that the council not backslide on the original $75 million legislation. Sawant called the smaller tax proposal as the “Durkan-Bezos deal,” referring to Amazon CEO Jeff Bezos, who opposed the original proposal.

Sawant brought up the fact that Amazon provided $350,000 to the Civic Alliance for a Sound Economy — which is sponsored by the Seattle Metropolitan Chamber of Commerce — that went toward Durkan’s mayoral campaign.

“Make no mistake,” Sawant said, “money is power under capitalism.”

Bezos also halted two construction projects in Seattle pending the outcome of the head-tax debate, which Sawant called extortion. Washington Attorney General Bob Ferguson rejected calls from labor group Working Washington to charge Amazon with intimidating a public servant — a Class B felony — over its construction decision.

The councilmember said Bezos becomes $275 million richer every day.

“That means that, every day he personally makes enough money to pay for Amazon’s share of this tax for 13 years every day,” she said.

While Amazon’s share of the head tax — proposed at 26 cents per employee per hour in the $75 million plan — would have been about $20 million, councilmembers that voted against it cited the impact it would have on other businesses. Starbucks and Uwajimaya were among other businesses that weighed in against the original legislation.

Seattle Metropolitan Chamber of Commerce president and CEO Marilyn Strickland issued a statement following the vote:

“Taxing jobs will not fix our region’s housing and homelessness problems. If the Seattle City Council is serious about addressing these challenges, I hope we can count on their leadership on two critical issues: the HALA upzones, which address our outdated zoning, and aligning our fragmented homelessness services system.

“We appreciate the leadership Mayor Durkan showed in a challenging, politicized environment.”

Consulting firm McKinsey & Company produced an independent report for the chamber of commerce to determine the level of funding needed to address homelessness in King County. The report states it would take “between $360 million and $410 million a year to tackle current levels of homelessness—that’s twice today’s spending.” 

The mayor issued a statement and held a press conference following the council’s passage of the employee-hours tax, stating her intent to sign the legislation. With a 9-0 vote of approval, Durkan couldn’t veto the legislation.

“This legislation will help us address our homelessness crisis without jeopardizing critical jobs,” Durkan said in her statement. “Because this ordinance represents a true shared solution, and because it lifts up those who have been left behind while also ensuring accountability and transparency, I plan to sign this legislation into law.”

Amazon vice president Drew Herdener issued a statement following the vote, expressing disappointment.

“While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” part of the statement reads, Herdener adding that the city “does not have a revenue problem — it has a spending efficiency problem.”

Washington Senate Republican Leader Mark Schoesler, who represents Asotin, Franklin, Garfield, Spokane and Whitman counties, issued a statement promising the legislation will either be overturned by the Legislature or a court decision.

“The Council is completely oblivious to what it takes to keep job creators in our state,” part of the statement reads. “Socialist Councilmember Sawant has convinced a majority to grab money it isn’t legally allowed to take. It will not stand. It will be revoked by the Legislature — if a court doesn’t do it first.”

Durkan also took to Twitter after the head tax passed, stating there will be accountability and oversight regarding how the new revenue is spent, and that includes forming an oversight committee, hiring an economist and making sure people are exiting homelessness.