Seattle council to consider a new payroll tax

Apr 9, 2020
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Written by Washington Retail
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Councilmembers Kshama Sawant and Tammy Morales have introduced an ordinance to charge a business payroll tax to pay for COVID-19 costs, including cash assistance for up to 100,000 low-income households.

The bill, which was referred to the Select Budget Committee, would impose a 1.3% tax on about 800 companies with annual business payrolls in Seattle of $7 million or more. Smaller businesses, government entities, nonprofit organizations, grocery stores, and businesses preempted from taxation by municipalities would be exempt from the tax.

The sponsors estimate the tax would generate $500 million annually. If the Council approves it, the tax would be effective June 1 of this year, but 2020 payments would be due with the final tax payment for 2021.

Funds raised from the tax would also be used for building affordable housing, retrofitting homes and increasing social services programs. Sponsors say the ordinance would address some of the needs of Seattle’s low-income and homeless population.

The bill could trigger the kind of public backlash that erupted with the Council’s 2018 approval of a $275 head tax. A successful petition drive to put a repeal initiative on the ballot forced the Seattle Council to repeal that head tax. Details of the ordinance are here. Details of how the funds would be spent are here and here.

Does Seattle really need to raise new taxes?

Federal pandemic aid to the State of Washington includes up to $1.3 billion in funding for cities with populations of 500,000 or more (Seattle is the only city large enough to qualify for those funds). At this point, it is unclear exactly how much federal funding the City of Seattle will receive.

Seattle residents also qualify for help from the federal government. Individuals with incomes of $75,000 or below (or joint filers making $150,000 or less) will receive $1,200 (or $2,400 for joint filers), plus $500 for each qualifying child. Laid off workers also qualify for enhanced unemployment insurance and businesses can access loan programs with the U.S. Small Business Administration to keep their employees fully employed.

Concerned businesses are urged to contact John Engber, Director of the Retail Industry Coalition of Seattle (“RICS”), at 206-850-5517 or jengber@washingtonretail.org. RICS is a grassroots organization of retailers across Seattle and is affiliated with Washington Retail.

Sources: City of Seattle, seattlepi.com