City Council Members Want to Bring Back the Employee Head Tax

Would probably get taxed. Charles Mudede

Seattle politicians can either keep complaining about being part of the most regressive tax system in the nation or they can do something about it.

Two Seattle City Council members today unveiled a proposal to tax large businesses based on how many employees they have. The tax (known as the "employee hours tax" or "head tax") would help fund more 24-hour homeless shelters, affordable housing, safe lots for people living in vehicles, and an expansion of the successful diversion program LEAD.

Council Members Mike O'Brien and Kirsten Harris-Talley plan to introduce the proposed tax as an amendment to the 2018 budget. Only businesses that gross more than $5 million a year would pay the tax. They would pay 5 cents per employee for every hour worked in a year (or about $100 per employee). O'Brien and Harris-Talley say that would only affect the top 10 percent of businesses in the city by earnings. The tax would raise about $24 million a year with most of that money directed to affordable housing and long-term housing vouchers for people experiencing homelessness, O'Brien and Harris-Talley said.

"This is an invitation for [large businesses] to help address what success has looked like and who’s been on the other side of that," Harris-Talley said today.

O'Brien cited a law firm he worked at before becoming a council member, which he said grossed $10 million a year. With 80 employees, the company would pay $8,000 a year. "Is it a meaningful chunk of money? Absolutely," O'Brien said. "Is it going to cause them to say we’re pulling up and going to Bellevue instead? I don’t think so."

O’Brien said the mayor’s proposed 2018 budget did include enough funding for shelters and housing. "Without this investment, I’m afraid our current budget sets us up for failure," he said.

The city once had a similar per-employee tax. Tim Burgess campaigned on repealing the tax in 2007. With backing from the Chamber of Commerce, the council got rid of it in 2009. Advocates and council members, including Kshama Sawant and Nick Licata, have tried over the years to bring it back—to pay for buses, for municipal broadband, for labor law enforcement—but have never succeeded.

Harris-Talley was appointed to the council last week to fill a temporary vacancy left when Burgess became mayor, replacing one likely "no" vote with a "yes."

O'Brien and Harris-Talley have not yet identified the exact types of housing programs and shelters that would be funded. They have support from the Housing for All coalition. Alison Eisinger, executive director of the Seattle/King County Coalition on Homelessness, praised the idea, saying it is "starting to get real about the revenue the city needs to take care of people in this city."

Burgess, with his history of opposing the tax and his support of the Chamber, is unlikely to support the proposal. But if O'Brien and Harris-Talley can convince a majority of their colleagues, they can add it to the budget. Council members will hold meetings about the budget over the next several weeks and plan to approve it by November 20. A new mayor will be sworn in November 28.

Maud Daudon, president and CEO of the Chamber of Commerce, issued a statement saying the city needs to "invest our resources wisely toward solutions that work, instead of pursuing a new tax on jobs." Citing other city money for housing and homelessness, Daudon said, "This is not a resource issue. It’s a matter of political will." She also slammed O'Brien's proposal to support people living in vehicles, saying, “Allowing people to camp and live in RVs is immoral and is not a long-term solution to our city’s homelessness crisis."

I've asked the mayor, all of the current council members, and the candidates for both mayor and council whether they support this plan.

Burgess's spokesperson said "We don't have a statement at this time. Once we learn more we’ll likely have something to say at a later date."

A representative from Sawant's office said she is supportive and has worked with O'Brien to develop the proposal. Council Member Lisa Herbold said she is not cosponsoring any budget amendments because she is now chair of the budget committee. In that role, Herbold will balance various council members' budget proposals into a budget package amending the mayor's proposal. "For this reason, I am not, at this stage, signing on as a sponsor to individual budget proposals," Herbold said. Council Member Rob Johnson said he is "taking [the proposal] very seriously." Johnson said he agrees the city needs to spend more on the homelessness crisis and will consider the head tax as well as other sources. "I don't have anything concrete yet, but I'm working on some proposals to complement theirs," he said.

Mayoral candidate Cary Moon said she “wholeheartedly support[s]” the proposal but may consider some exemptions for small businesses “with high sales volume but low profit margins.” A spokesperson for mayoral candidate Jenny Durkan's campaign did not directly answer whether she supports the tax. She said Durakan "looks forward to reviewing the full proposal and seeing how it evolves during the budget process. She will push for a more progressive tax system, which ensures that people and companies that can afford to pay more do pay more."

City council candidate Jon Grant is "thrilled" at the proposal and supportive, said his campaign manager. Pat Murakami, who is running a long-shot campaign against incumbent Lorena González, said she would seek business feedback and would a tax on net instead of gross profits.

The rest have not yet responded. I'm updating this post with reactions as I hear back.