Special Note: Does your company pay Seattle’s Payroll Expense Tax? If you have any questions or concerns, email us here.
On Nov. 30, the Seattle City Council concluded its role in the mid-biennium budget process — with mixed results for our community. Mayor Bruce Harrell put his signature on the budget on Dec. 1 and did not veto any items.
We’ll start with a recap of what happened:
The good: The spending plan that passed includes two key items our members actively supported – Mayor Harrell’s public safety investments and a directive for the mayor and the council to partner in a review of city spending. And in great news, Seattle City Council chose not to vote on implementing a local capital gains tax, and it rejected Transportation Impact Fees – a tax on development that would make housing more expensive in Seattle. This was a hard-fought victory that we would not have been able to accomplish without our partners at the Housing Development Consortium who were instrumental in securing a fifth “no” vote. Everyone who worked in our coalition on this should be incredibly proud of this outcome.
The bad: The council passed a new $0.10 charge on app-based deliveries to pay for new regulations it voted to impose on delivery network companies. We and our partners worked hard to achieve some concessions in the regulations and narrow the use of the funds by ensuring the revenue would come from a fee, rather than a tax.
And the ugly: By a vote of 6-3, the Seattle City Council increased the Payroll Expense Tax. We have asked Mayor Harrell to veto this misguided legislation, which will make it more expensive to employ people in Seattle. The proposal raises the tax by 6.5% to generate $20 million for mental health support in schools with no stated plan or outcomes. The objectives are not wrong, but the Council’s tax-first, plan-later approach is misguided. This proposal will increase taxes for 500 businesses, without considering any alternatives or talking to any stakeholders at a time when we are working to further downtown revitalization and facing significant challenges in the downtown office market.
Even though six of the nine current Seattle City Council members are leaving office in 31 days, several of them agreed to fast-track new fees and taxes in a matter of days with no clear spending plans or defined outcomes. Simply raising taxes is not the measure of success – making progress on issues like public safety is.
A reminder that from 2017 through 2023, city general fund revenues increased by 3.7% per year while city spending grew at a higher rate of 5.5%.
On top of that annual revenue growth, the city approved an additional $300 million in new annual taxes starting in 2021.
Far too frequently, the Seattle City Council ceded the tone, tenor, and substance of its work to theater, and sadly, that’s the primary legacy of the last four years. The most recent election made clear that Seattleites are tired of the tax-first, plan-later approach and expect results on the most pressing issues facing the city. We – and the voters – look forward to welcoming a new group of leaders to city hall in January; leaders who embrace a diversity of opinions, are curious to learn, willing to compromise, and want to bring facts and data to their debates and decision-making. Leaders who value making progress on the issues over issuing litmus tests. And leaders who are willing to reject the status quo and performative politics.
We encourage the incoming council to remember that budgets reflect priorities. We continue to call on the city to conduct a thorough analysis of its spending and look forward to partnering with the new council next year to ensure Seattle is a dynamic and thriving place to live, visit, and operate a business.
Sincerely,
Rachel Smith
President and CEO
Seattle Metropolitan Chamber of Commerce
Jon Scholes
President and CEO
Look for additional information from the Chamber on implementation of the Payroll Expense Tax increase, effective Jan. 1, 2024, in the coming days.
