Members of the Seattle City Council's Select Budget Committee received, via teleconference, a revised revenue and economic forecast for the city that estimated shortfalls of $210 million to $300 million in tax revenue. At the same meeting, the public had its first chance to weigh in on a payroll tax package proposal that aims to raise $500 million annually from businesses. The measure would impose a 1.3% excise tax on all nonexempt businesses with more than $7 million in annual payroll and nexus in Seattle.
City Budget Office Director Ben Noble told committee members that the city is facing a steep recession unlike any it's faced before, even during the 2008 recession. That means readjusting the 2020 fiscal year budget, and there will be a big impact on the 2021 budget as well, he said.
"The overall message is that the economic effects are of a scale that cannot be fully mitigated by [federal] stimulus overall," Noble said.
At the meeting, 60 people signed up to speak regarding a payroll tax measure introduced this month by Council Members Kshama Sawant, a Socialist Alternative Party member, and Tammy Morales, a Democrat.
Many speakers were supportive of the tax, though several said the measure would hurt the city's business ecosystem.
The taxes would go toward repaying city outlays of emergency cash payments in 2020 to help people affected by the outbreak of COVID-19, the respiratory disease caused by the virus. Four months of cash payments of $500 would be distributed to up to 100,000 low-income households, Sawant has said. Beginning in 2021, the tax revenue would help pay for affordable housing and other housing investments related to a local Green New Deal, according to a fiscal note.
Exempted from the tax would be grocery stores, federal and state governments, nonprofits and those preempted from taxation by city, state or federal law, the fiscal note said.
One of the speakers, Emily McArthur, said that before the pandemic hit there was already massive inequality in Seattle, with many people having less than $1,000 in savings while people such as Jeff Bezos, chief executive of Amazon, had billions of dollars. Amazon is based in Seattle.
"The record homelessness, the record displacement of disproportionately black communities — what was already bad will brutally escalate if you do not act to tax Amazon and big business," McArthur said.
Moti Krauthamer, another speaker at the hearing, said the council hasn't been transparent in exactly how and where the initial funds would come from and said the council should table the measure. But if the council does move forward with the plan, he said, city government payrolls shouldn't be exempt.
"You should be willing to eat your own dog food," Krauthamer said.
To generate funds to help the city deal with the novel coronavirus pandemic, the sponsors have said the tax would go into effect on June 1. The first payments for June through December are estimated to generate $286.4 million, though they wouldn't be due until Feb. 1, 2022.
The proposal comprises one bill that imposes the tax, a spending plan and a measure that would allow borrowing cash from other city funds to pay for the measure and then pay off those funds with the payroll tax revenue.
According to an analysis of the tax, about 800 businesses would be required to pay the tax after exemptions were accounted for, making up about 2% of the nearly 40,000 businesses estimated to be in Seattle.
After about an hour of public testimony, comments from council members and a presentation on the city's budget and revenue forecasts, only committee members heard analysis of the spending plan. The tax plan and interfund loan will be detailed at the next committee hearing.
Public engagement on the tax proposal has gained steam. A campaign with the same name as one that opposed a Seattle 2018 head tax, No Tax on Jobs, had gathered more than 6,000 online signatures in opposition to the tax as of Wednesday. When Sawant and Morales introduced the measure, they put forward a petition demanding the tax that was signed by more than 5,400 people.
Whether the measure has enough support from the council to pass is unclear. If passed as an emergency measure, the package could be immune from repeal through a public referendum, though that would mean seven out of nine members would need to vote yes and the council couldn't override a veto by Democratic Mayor Jenny Durkan.
In a statement Tuesday, Durkan said her administration was rethinking how to recover from the effects of the pandemic while responding to community needs. The city was evaluating how to use state and federal aid as well as city reserves and considering repurposing state tax levy revenue.
Durkan also said her administration was reviewing whether to adjust the budget through administrative or council action but didn't mention the consideration of any new taxes, which she's expressed reservations about.
Democratic Council Member Alex Pedersen released an op-ed article Wednesday that he co-wrote with an economist with a real estate company opposing the tax. The proposal was bad economics during a recession, would push business out of Seattle and would affect many more businesses than just Amazon, he said. He added that the coronavirus pandemic was also being used as a cover for the tax, and said the city instead should draw from emergency funds and cut spending by 10%.
"Until Seattle's economy fully recovers, the City Council should reject the Sawant tax — or Mayor Jenny Durkan should veto it," Pedersen said.
--Editing by Neil Cohen.
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