Mayor Durkan and Executive Constantine sign a memorandum of understanding on homelessness back in 2018. (Mayor Durkan's Office)

Yesterday, Rep. Nicole Macri (D-Seattle) introduced a bill that would grant King County the authority to enact a progressive payroll tax targeting large firms with high-paid employees who earn more than $150,000 per year. House Bill 2907 has 13 sponsors in the state house–all Democrats. Seattle Mayor Jenny Durkan and King County Executive Dow Constantine issued a joint statement backing the effort.

The legislation could allow King County to generate approximately $121 million annually for “housing, homelessness, public safety, and behavioral health services across the region,” Mayor Durkan and Executive Constantine said.

The payroll tax is the next chapter in the head tax saga. The Seattle City Council passed a employee hours tax or “head tax” in summer of 2018, but quickly repealed it amid corporate backlash. Back then, Mayor Durkan opposed the larger original proposal that converted to a Seattle-only payroll tax after a few years. Mayor Durkan threatened a veto and got a five-year sunset clause added and the tax scaled back to bring in $47 million per year. Despite those efforts, conservatives and big business joined forces on a repeal campaign.

Business leaders came out of the repeal feeling emboldened and poised to “take back” the city council. It turns out the electorate didn’t share that proclivity; most chamber candidates lost. This is despite a record haul for pro-business political action committees–more than $3 million in all, with half of that from Amazon alone.

Among the victors was Councilmember Kshama Sawant, who centered her campaign on taxing big business, often calling out Amazon by name. Sawant quickly pursued that goal with an inaugural “Tax Amazon” rally and a series of “action conferences” laying the grassroots groundwork for a big business tax to fund social housing. She credited the Tax Amazon movement with jumpstarting the county-level effort.

“It is no coincidence that this proposal comes right after our Tax Amazon movement has rallied with hundreds to fight for a big business tax of $300 to 500 million per year to fund green, union-built social housing,” Councilmember Sawant said in a statement. “We welcome the announcement that King County may gain the ability to tax big business, but our movement has learned the lesson from the repeal of the 2018 Amazon Tax. We will not put our faith in corporate politicians to stand up to bullying from Bezos and his billionaire friends. We will keep organizing and we will win the biggest possible Amazon Tax based on the strength of our movement.”

Washington Hall was filled to the brim with Sawant supporters. (Photo by Doug Trumm)
Washington Hall was filled to the brim with supporters of Councilmember Kshama Sawant and the Tax Amazon movement. (Photo by author)

The proposed countywide payroll tax would be smaller than what Tax Amazon organizers have envisioned. Moreover, it’s being pitched as dedicated to sustainable social housing as part of the Seattle Green New Deal. If supporters of the county payroll tax will also emphasize social housing and connect the package to the Seattle Green New Deal remains to be seen.

Assuming the payroll tax bill becomes state law–the King County Council would still need to go ahead and pass a payroll tax to take advantage of the new authority and select the particular investments it wants to make in the four proscribed categories:

  • “Affordable housing;”
  • “Investments to tackle homelessness;”
  • “Support for behavioral health and substance use disorder;” and
  • “Upstream public safety and diversion solutions.”

The legislation authorizes King County to impose a tax of 0.1% to 0.2% on compensation paid by businesses to employees making at least $150,000 a year starting January 1 2021. It exempts supermarkets, motor-vehicle fuel businesses, liquor businesses, comprehensive cancer centers, and small businesses of 50 employees or fewer that pay at least half their employees less than $150,000 per year.

As currently worded, the bill requires King County over a five-year period to dedicate at least 50% of payroll tax revenue to “acquire, rehabilitate, or construct affordable housing” including supportive housing. Meanwhile, no more than 10% could be spent on public safety and behavioral health interventions defined in subsection (1)(d).

The Martin Luther King County Labor Council is backing the payroll tax as are some major employers, Rep. Macri said. The only corporation to come out as a supporter thus far is Expedia Group. Microsoft and Amazon have remained silent.

At least one commentator looked at the King County payroll tax as an effort to co-opt the Tax Amazon movement.

“More evidence of the need for a grassroots populist push to tax the rich–big corporations and their political allies want to head [off] a strong tax with a weak, loophole-riddled plan,” Robert Cruickshank said in a tweet–Cruickshank is Campaign Director at Demand Progress and a contributor at The Urbanist.

One thing Sawant and the Seattle Council Council don’t have, though, is authority to tax the rest of King County outside of Seattle.

Payroll tax supporters will likely need to shore up support in the state legislature. In addition to Rep. Macri, the sponsors include Representatives Jerry Springer, Joe Fitzgibbon, Noel Frame, Gerry Pollet, Eileen Cody, Frank Chopp, Gael Tarleton, Vandana Slatter, Beth Doglio, Zack Hudgins, Tana Senn, and Mia Gregerson. Some Republicans are already speaking out against the payroll tax, and few could be counted on to support it–and some moderate Democrats may be tough sells, too. Despite Democratic control of the legislature, progressive tax reform has remained elusive.

“Our region is working every day to tackle homelessness and increase the production of affordable housing, but we know that we must do more,” Mayor Durkan and Executive Constantine said in their joint statement. “We thank legislators in Olympia for recognizing that regional need, and for bringing forward a progressive new funding tool for King County–and we encourage them to act with urgency.”

Mayor Durkan and Executive Constantine plan to continue outreach to affected businesses.

“Because of our regressive tax code, King County has limited revenue options. This crisis demands more tools for the region outside of property and sales taxes,” they continued. “Many of the region’s largest businesses, with deep roots in our community, want to participate in solutions, and want to do so with a comprehensive, countywide approach to homelessness, housing, behavioral health, and public safety. We agree, and this bill is a strong step in that direction. We know more input and ideas will help make this bill better, but we cannot miss this moment to act.”

Author’s note: This article has been updated with comment from Councilmember Kshama Sawant.

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Doug Trumm is publisher of The Urbanist. An Urbanist writer since 2015, he dreams of pedestrianizing streets, blanketing the city in bus lanes, and unleashing a mass timber building spree to end the affordable housing shortage and avert our coming climate catastrophe. He graduated from the Evans School of Public Policy and Governance at the University of Washington in 2019. He lives in East Fremont and loves to explore the city on his bike.