Seattle's controversial "head tax" proposal could bring in $75 million a year
SEATTLE - The top three percent of the high grossing businesses in Seattle will carry the load of Seattle’s proposed employee head tax. Backers are calling it the “Progressive Tax on Business."
The tax will apply only to those companies with $20 million or more annually in taxable gross receipts as measured under the City’s Business and Occupation tax. The city estimates that will be 500 businesses.
One of them is Merlino Foods. The 118-year-old Seattle business employs roughly 100 full time workers.
The first two years of the tax has businesses like Merlino paying $.26 per hour per employee with a $500 maximum per year.
“That’s $50,000 for us, I’m not sure where we are going to get the money to pay for that,” said Todd Biesold, Merlino’s CFO.
What makes Biesold more upset is that the tax is based on total revenues and not net-income.
“We don't make $20 million a year, those are gross sales,” said Biesold. “They have no idea what my margins are compared to someone else. This is the grocery business, margins are low, so it's just not fair.”
“I believe it’s fair,” said Seattle City Councilmember Lisa Herbold, who is also co-chair of a task force that is getting input on the proposed tax.
“There is a strong nexus between the increase in growth between these top businesses and the increase in homelessness, and this is a tool we are proposing to address that,” she added.
The tax is expected to raise $75 million each year for the next five years starting January 1, 2019.
Roughly 75 percent of the money will go toward affordable housing, which is expected to provide about 1,334 affordable homes over the five years, and 435 permanent, supportive housing units for homeless who can fend for themselves.
The affordable homes will go to workers making between $20,000 to $46,000 per year, depending if they are single or a couple.
$15 million will go to homeless assistance and pay for trash pickup, hygiene services and tiny homes for sanctioned homeless camps.
Councilmember Mike Obrien has been pushing to a head tax for two years and doesn’t believe businesses will leave Seattle because of it.
“I don't think that scale of change is enough to cause people to say, 'I can no longer can afford to be in Seattle, I need to go across the bridge or across the country,'” said O’Brien.
The employee hours tax would be replaced by a business payroll tax in 2021.
The same thresholds would apply except the $.26 tax will be replaced by seven percent of all payroll-related to work done in Seattle.
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