How Did Seattle's Proposed Head Tax on Businesses Ever Get This Far?

The business community should instead support a common-sense tax reform like a statewide income tax
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This article appears in the June 2018 issue. Click here for a free subscription.

Jenny Durkan has gotten off to a great start as mayor of Seattle by exhibiting something this region needs a lot more of: common sense. With the city headed toward a perfect storm of traffic congestion thanks to a string of major new construction projects combined with the upcoming Alaska Viaduct demolition, Durkan’s decision to delay the creation of a bicycle path along Fourth Avenue made perfect sense.

And Durkan’s proposal to consider tolling cars coming into downtown Seattle using something called congestion pricing is a sensible approach large cities like London have used effectively to discourage motorists from overwhelming the city.

What doesn’t make sense is the Seattle City Council’s proposal to require any company with sales in Seattle of more than $20 million to pay a 25-cents-an hour tax — about $500 a year — for each of its Seattle workers. Such a tax on jobs would be particularly onerous to companies like supermarkets, which have high revenues but narrow profit margins.

This head tax would also heavily affect companies like Amazon, which made the sensible decision to situate its headquarters downtown so that 55 percent of its employees can now take public transit, walk or bicycle to work. Meanwhile, companies like Microsoft, which has thousands of employees living in Seattle who commute to work in Redmond, would be untaxed.

In response to the proposed head tax, Amazon has now hit the brakes on current construction projects, and is threatening to stop its plans for continued growth in downtown Seattle.

The head tax, along with Seattle’s many other antibusiness measures, will simply encourage more companies to expand their workforces outside Seattle.

While we agree that more money needs to be spent on affordable housing, we don’t agree that a specific tax should be levied to pay for homelessness before the city has figured out an effective way to tackle the problem. Broad social problems such as homelessness, opioid addiction and mental health treatment need to be addressed on a statewide basis. Of course, that means finding new sources of revenue beyond real estate and sales taxes, which are already too high.

Which brings us to the common-sense solution that many of us would rather not think about: the imposition of a statewide income tax. Washington state has one of the most regressive tax systems in the country. Businesses in Seattle should work more aggressively with their counterparts in the rest of the state to press Olympia for comprehensive tax reform that introduces a moderate state income tax capped at two or three percent of income.

Such a tax, combined with a reduction in our overinflated sales and real estate taxes, would more fairly redistribute the tax burden. If the business community would support such common-sense tax reform, it would carry more moral authority when it fights nonsense measures like the head tax.

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