Businesses urge leaders to defeat payroll tax proposal

SEATTLE -- The economic downturn is having big impacts on city budgets. Seattle city leaders announced an immediate hiring freeze and other measures to reduce costs as estimated revenue for this year could fall by a whopping 20-percent.

The tough numbers were revealed while city council considers a new tax aimed at the city’s largest employers to raise $500 million dollars a year.

The proposal comes from councilmembers Kshama Sawant and Tammy Morales. It’s intended to put cash into the hands of people living in Seattle who are struggling through the pandemic.

But many business leaders warned lawmakers the plan could be dangerous and could cause revenues to dwindle further.

“Reducing 2020 spending cannot mean austerity in any way,” said Sawant during a Wednesday committee hearing regarding the Payroll Expense Tax Package.

“Overall, there’s not going to be a recovery if we keep relying on regressive sources of taxes,” she added.

The plan would levy a tax on approximately 2% of the city’s employers to give cash to 100,000 residents in need, invest in affordable housing and spur green new deal projects.

“That is a cold hard fact, whether the wealthy like it or not, they need to be taxed if we’re going to recover the budget shortfall,” said Sawant.

The economic shutdown has punched a massive hole in the city’s budget and Mayor Jenny Durkan warned recovery could take years.

“That payroll tax if any passes it would not be collected until 2022,” she said. “In addressing this shortfall and deficit we are not going to be able to avail ourselves of a payroll tax.”

“It’s a serious distraction,” said Louise Chernin, GSBA President. “It’s divisive, it’s the wrong time.”

Chernin added the tax could put undue stress on companies already struggling to keep employees on the payroll.

The Downtown Seattle Association is also pleading with city lawmakers, saying thousands of city residents and business owners worry the tax could cause a negative ripple effect.

From hardware stores to hotels, businesses across sectors say they agree the city should instead invest in public works infrastructure and support small enterprises.

Chernin believes state lawmakers could make a bigger impact.

“We need to go on the state level where we organize together to have a more progressive tax system in which everybody, from individuals to business people are all paying so that we have a reliable source of revenue,” she said.

City lawmakers could vote on the proposed tax in May.

As unemployment numbers grow and coronavirus continues to spread, Mayor Durkan warns the pandemic will be the most consequential event in the city’s history.

“It is going to take a period of years not months,” said Durkan. “Having a discussion with the state and others about how we might be able to do some outside financing to cover some of those gaps in a prudent way is important for us to do.”