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Seattle City Council’s Proposed a Tax on Jobs: Final Blow to Businesses?

Earlier this week the Seattle Times editorial board called on Mayor Jenny Durkan to veto the proposal for a head tax on jobs if it’s approved by city council. As they argue: “Seattle’s City Council will harm the city, its business climate and workers across the board if it starts taxing large companies for every person they hire.”

The council has put forward the proposal for a per-hour tax that comes out to about $500 per full-time employee. That bill would apply to nearly 600 employers — any  business with revenue over $20 million — and generate $75 million annually. In 2021, the measure would move from an hourly tax to a payroll tax, bringing in roughly the same amount of revenue from those employers.

The board argues that the measure would reduce jobs and opportunities in Seattle, along with the city’s ability to attract new businesses.

The proposed tax, as the Seattle Times puts it, “is the latest effort by Seattle politicians to make a symbolic ‘eat the rich’ gesture, even though they already tax business heavily.”

Instead of promoting the success of local companies that bring vitality and prosperity to the region, the council is penalizing them for its own failure to adequately budget and manage the city’s most pressing needs.

Branding this as a progressive initiative is hollow grandstanding. To effectively shift the tax burden, the council would have to cut regressive sales and property taxes, but that’s not what it’s doing.

As the Seattle Times editors write, “Councilmembers recently voted to tax soda because they expect the tax to reduce spending on soda. So, what do they expect if they tax jobs?”

The board also argued that such a tax would be a detriment to businesses of all sizes. “They will reduce job opportunities for youth, immigrants and laborers — who depend on economic growth that this tax will dampen.”

Moreover, Seattle doesn’t need to layer on more taxes. It’s flush with a budget that grew 17.4 percent since 2015.

Over 50% of Seattle’s tax revenue is collected from businesses. And then there’s the money provided through paychecks to residents and then to City Hall. Business groups have typically been in strong support of levies for needs like transit and housing, but they adamantly oppose this jobs tax.

The council released its tax proposal Friday, just ahead of a public hearing at 5:30 p.m. Monday at City Hall. Final approval is expected May 14.

Furthermore, the Seattle Times rejects the claim that the tax is a moral necessity to address the homeless crisis. As the editors point out, “Nearly $200 million a year is spent in Seattle and King County on homeless and housing services. The city and county also are mulling a regional, and regressive, property tax to generate another $68 million yearly. That’s for a homeless population that last year, in a point-in-time count, numbered 5,485 unsheltered people and 6,158 in shelters, transitional housing or safe havens.

Many analysts have argued that poor policies and mismanagement, rather than funding, are the larger problem.

Meanwhile, companies like Starbucks and Amazon stepped up, raising millions of dollars and even building a family shelter inside an Amazon office tower, a commitment worth more than $10 million. In return, the council says they aren’t paying their fair portion.

The editorial board even speculates that these moves suggest why Amazon is building a second headquarters elsewhere. “Its leaders are tired of being a punching bag for self-aggrandizing ideologues, especially after investing $30 billion in Seattle.”

It’s certainly worth considering that Amazon created 50,000 jobs in Seattle and plans to add 10,000 more. Although critics are quick to point out that most people working for the company moved here from outside, and have resulted in skyrocketing housing prices. Those new jobs could easily go elsewhere – like Vancouver, B.C., Portland or wherever the second headquarters lands.

So where does the mayor stand? “Durkan tried to split the baby,” the Seattle Times wrote. “She urged the council to exempt small businesses and other favored constituencies. But that fails to address the tax’s overall negative effect on Seattle’s tarnished business climate and companies of all sizes.”

Small business owners tend to agree. “Even if small business gets a carve-out, it still trickles down on us,” said Taylor Hoang, who closed two of her Pho Cyclo restaurants in Seattle after struggles with rising business costs, traffic and parking.

As the Editorial concludes: “Council members should reject this flawed proposal and find legitimate ways to reduce residents’ tax burden, starting with fiscal discipline. If they proceed, Durkan must veto the tax and use her political and negotiating skills to ensure the veto holds.”

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