Image: Flickr by Tom Mrazek

Both state government and cities such as Seattle are about to endure 20-30 percent cuts in revenue. Along with cuts in programs (watch out, state universities, the usual go-to targets!) will come proposals for increased taxes. Seattle City Council, for instance, is currently debating new taxes on businesses.

These debates now have some positive momentum, arising from the almost-successful effort in the state Legislature to enact new business taxes in King County to fund low-income housing programs. The measure faltered, mostly by running out of time and running into the coronavirus uncertainties, but it may also have found a new sweet spot for future taxes in King County. And a partner in local mega-corporations.

Notably, the proposal this time arose from big business, which was eager to fend off worse taxes, Seattle-only taxes, and a soak-the-fat-cats initiative led by Councilmember Kshama Sawant. The business interests, led by Amazon, Microsoft, Starbucks, and Expedia, also wanted to reward the city and county for forming a new regional homelessness agency. Helped along by Mayor Jenny Durkan and County Executive Dow Constantine, as well as ex-Gov. Chris Gregoire (who heads the organization of top CEOs known as Challenge Seattle), these heavyweights brought to the Legislature its business-backed proposal earlier this year.

The tax plan had these components: It was King Countywide, not just Seattle (to avoid enticing Seattle companies to migrate); big business was on board; the money was earmarked for building low-income housing; it had a pre-emption clause, forbidding cities from running their own tax proposals, as Councilmember Sawant threatens to do; the .25% tax was levied on employees making more than $150,000 a year and only on companies with more than 50 employees; the new tax would yield about $100 million per year for Seattle, double that for the rest of the county; and it had complicated mechanisms for equity to recipient suburban cities and for businesses being taxed.

The Legislature, famously averse to raising taxes or helping a single county, suddenly had a gift horse to inspect.

The proposal landed in the lap of Rep. Nicole Macri, a second-term legislator who works at the Downtown Emergency Services Center and represents the liberal Seattle 43rd District. She’s also the caucus expert on homeless issues. As such, HB 2907 was a bit of an orphan, with both new Speaker Laurie Jinkins and Gov. Jay Inslee (more interested in a statewide program) cautious. Macri, a smart newcomer, was neither a legislative heavyweight nor a neutral broker.

Still, the measure gained momentum. “It seemed like the next step” after the creation of the city-county agency, says Macri. Gregoire, who was all over the bill, is known for her ability to corral votes and to close the deal. It was a nervous coalition. Suburban cities (39 of them in King County) had other priorities, rivalries, and their own pet tax proposals. Microsoft and Amazon had their differences, Macri reports. Labor was hesitant about precluding other local taxes. Since it was a tax on wealthy employees, doctors and other high-earning professionals were fidgety. Labor and the left wing of the Democratic Party didn’t like the pre-emption clause (banning new local taxes), but removing the clause was a deal-breaker for business.

And then, just before introducing the bill to the floor, Macri yanked the pre-emption clause and the deal fell apart. She explained to me that her last-minute decision to remove that crucial aspect was an “effort to get the stakeholders to the table.” Macri, who has political ties to Seattle’s left wing, says she expected the controversial pre-emption clause could come back into the negotiated bill, particularly if Gregoire could be “the closer.” Ultimately, the advocates ran out of time, the complicated house of cards toppled from being attacked from Left and Right, and the first innings of the coronavirus crisis distracted everybody.

Timing is everything in politics, they say, and timing (not just the shortage of it) was awkward. The bill arose at a time when Bernie Sanders seemed heading for the Democratic nomination and when Sawant’s leverage of an initiative (at a far higher level) were genuine threats. These factors motivated big business to propose its half-loaf measure. And then came the huge distraction of the coronavirus. It never made it to the floor.

Even so, there was a modicum of political progress. Instead of the usual labor-business showdown, business was in favor of a tax and building housing — and flexible in negotiations. The ultimate amount, about $100 million a year for Seattle for housing, seemed like a good consensus figure to build on. Sen. Sanders faded, as did the chances for Sawant’s initiative (how do you gather signatures with social distancing, and is this a good time to hammer business?), and these two (un)developments also took wind out of businesses’ sails.

As for the countywide approach, given all the cats to herd, that may prove hard to reassemble. (The suburbs don’t doesn’t really have a homeless problem and isn’t keen on low-income housing.) What mattered most was the finding of the $100-million sweet spot, which might next show up in the city of Seattle’s current debate over a business tax. There is even some rumored interest by the non-Sawant majority of the city council in a flat-rate income tax (with protections for low-earners), now that the courts have ruled that Seattle can tax income (capped at 1% and flat-rate only).

Whether any new taxes can be passed in this deep recession is one question. Also uncertain is whether services for housing the poor and the homeless are politically palatable during a pandemic and a revenue drought.

Nonetheless, the whole episode, close but no cigar, was a signal that the business community is actively trying to solve social problems and settling on a reasonable compromise. This is progress — not just out-smiting Sawant and her business-bashing troops (as happened with the short-lived Seattle head tax) so much as outsmarting her by seizing the initiative.

2 COMMENTS

  1. Nicole’s bill was sadly not passed; opposed by Seattle pols because of its poison pill. If the governor calls a special session, maybe it could resurface. Perhaps without the problematic features. All governments in world of hurt fiscally now and it is the time to tread cautiosly to preserve jobs, not just tax them.

  2. It is likely that this business tax concept will come back up in the special legislative session that is almost certain for late June or July. One modification, suggested by former Seattle city councilmember Tim Burgess, would grant county authority to impose this tax in the state’s five largest counties—Snohomish, King, Pierce, Clark and Spokane. In Olympia, the preemption clause still would face an uncertain fate. Possibly the rate of the tax could go up, particularly if the preemption clause comes back.

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