This afternoon the City Council voted out of committee a proposed payroll tax, setting it up for final adoption next Monday.
As expected, the Council backed Council member Mosqueda’s “Jump Start Seattle” package, rather than the “Amazon Tax” backed by Council members Sawant and Morales. Mosqueda’s plan raises less than half the revenues than Sawant’s, but had the backing of labor, some in the business community, and most of Mosqueda’s colleagues. Nevertheless, the Council members plowed through a long list of proposed amendments over the course of the four hours they deliberated on the bill today, often competing changes to the same provision in the bill. In the end, they adopted four amendments:
- one proposed by Mosqueda and Morales that adjusted the tax structure and rates. It added a new middle tier for companies with total Seattle-based salaries between $100 million and $1 billion, adjust the threshold for higher salaries from $500,000 down to $400,000, and increased the tax rates across the board for the higher salary tier. The new rates look like this:
The amendment increased the expected 2021 revenues from $175 million to $214 million.
- one proposed by Sawant that removed the 10-year sunset on the tax. The original version of the amendments made other changes as well, but those were stripped out leaving just the removal of the sunset clause. This amendment barely passed, by a 4-3 vote with two abstentions.
- one proposed by Mosqueda that tweaks the “level playing field” language in the bill, saying that the Council intends to monitor county and state efforts to pass progressive legislation to ensure that Seattle businesses aren’t placed at a disadvantage due to being taxed more than businesses in other jurisdictions, and potentially lower or even repeal the Seattle payroll tax if new county or state progressive taxes fully replace the revenues.
- one technical amendment that fixes a drafting error in the definition of “compensation.”
Equally notable were the amendments that failed, including :
- a series by Sawant that would have essentially morphed Mosqueda’s bill into Sawant’s competing proposal;
- one by Herbold and Sawant that would have moved up the effective date of the tax from January 1, 2021 to August 1, 2020. It would have generated another $74 million for the city, but there were concerns about the effect it would have on businesses struggle to stabilize right now. Only Sawant, Morales and Herbold voted for it.
- one by Pedersen and Juarez that would have placed the bill on the November ballot for voter approval. Juarez cited the history of Seattle voters in electing to tax themselves, while Mosqueda said that she believes they can’t wait until November, Gonzalez said that she believes “the sentiment of the public has changed” since the “head tax” debacle two years ago, Morales said that she thinks they were elected to make hard decisions like this one, and Herbold said that while earlier this year she supported sending it to the voters, she has since flipped on this bill because she believes the bill is different and she see the urgency of passing it now. Pedersen and Juarez were the only “yes” votes.
- one by Pedersen that would exempt all 501(c)(3) nonprofits. Mosqueda opposed it, saying that the stakeholders she spoke with didn’t raise this as a concern; Strauss also opposed it,s saying that “nonprofit” is just a tax status and said “not all nonprofits are providing a benefit to the community.” Lewis, Pedersen and Juarez were the only three “yes” votes, though Mosqueda and Pedersen are continue to work on an amendment that would exempt hospitals and healthcare organizations that serve Medicare and Medicaid patients.
The Council members voted 7-2 to vote it out of committee, with Pedersen and Juarez the two “no” votes. The payroll tax bill will come up for final approval by the full City Council next Monday, July 6.
The Council also voted out of committee the accompanying “Jump Start” spending bill, after stripping out most of the quantitative commitments in the bill. The final version simply lists a number of categories of spending, with an expectation that the City Council will make exact appropriations annually as part of the budget process. Mosqueda intends to write the first year’s spending plan into a resolution, which she will bring forward for a vote on July 15th.
Pedersen offered two amendments, both of which passed unanimously. The first added a requirement for new programs funded in the spending plan to be evaluated and reported back to the Council. The second placed restrictions on membership on the related Oversight Committee to prevent rampant conflicts of interest by limiting the number of members who work for organizations receiving funding from the tax revenues.
The final bill passed by an 8-0-1 vote, with Pedersen abstaining.
Despite Council member Herbold’s pleading with the business community today not to organize a referendum campaign against the bill, it may still be challenged in court, particularly over its “top tier” higher tax rates which seem to apply to just one company: Amazon.
The third bill in the Jump Start package, which takes money from the city’s Emergency Fund and “rainy day” fund for COVID-19 relief, will come up for a vote on July 15, according to Mosqueda.
I hope you found this article valuable. If you did, please take a moment to make a contribution to support my ongoing work. Thanks!