Mosqueda Introduces New Big Business Tax to Fund COVID-19 Relief

by Chetanya Robinson

With a new big business tax proposal from Councilmember Teresa Mosqueda (At Large representative), the Seattle City Council is now weighing two plans to fund COVID-19 relief for Seattle with progressive revenue sources.

Mosqueda’s proposal, “JumpStart Seattle,” would tax the top three percent of Seattle businesses to fund grants for childcare facilities and small businesses, grocery vouchers for low-income people, direct financial help for immigrant and refugee households, construction of affordable housing, and more.

“Our community is hurting. Our economy is tanking,” Mosqueda said while introducing the tax during a press conference on June 16. “We cannot wait for the feds or the state to step in — we have to act now to help Seattle.”

Breakdown of Mosqueda’s proposed business tax. (Source: Seattle City Councilmember Teresa Mosqueda’s office)

Mosqueda’s legislation competes with the $500 million-per-year tax introduced at the beginning of April by Councilmembers Tammy Morales (District 2, southeast Seattle) and Kshama Sawant (District 3, central Seattle). City Council is once again considering this tax — which is aligned with the Tax Amazon movement — after it was temporarily suspended by Council President González for procedural reasons that no longer apply.

Like Sawant’s and Morales’s legislation, Mosqueda’s would start spending on emergency COVID-19 relief efforts in 2020, before the tax is actually collected. Borrowing $86 million dollars from City reserves, which would later be replenished, it would allocate $36 million toward housing and homelessness prevention, $18 million toward support for small businesses in the form of $10,000-dollar grants to businesses and for childcare providers, another $18 million toward financial assistance for immigrants and refugees, and $14 million toward emergency grocery vouchers for 16,000 households.

Another $86 million dollars would be spent in 2021, 20 percent of it to continue funding the COVID-19 relief programs of 2020. The remaining 75 percent that year, after accounting for administrative costs, would go toward City programs and services that would otherwise undergo funding cuts due to the budget shortfall brought by COVID-19.

Starting in 2022, the new tax would be collected and would start investing $203 million per year in affordable housing construction (65 percent), support for small businesses (20 percent), and addressing systemic inequalities through the Equitable Development Initiative (10 percent).

The tax expires on December 31, 2030 — or earlier, if King County or the state creates a new progressive revenue source that meets the same needs. An infographic explanation of the tax can be viewed here.

Mosqueda framed her tax proposal as a response to the COVID-19 pandemic, the resulting economic collapse, and the worsening of systemic inequities. It’s a similar set of problems targeted by Councilmembers Morales and Sawant in their proposal, which would pay 100,000 low-income Seattle households $500 dollars per month over four months, and in the following years would construct new affordable housing as well as implementing measures as part of a Green New Deal for Seattle.

Like Morales’s and Sawant’s legislation, Mosqueda’s tax would be funded by taxing businesses with a payroll of over $7 million per year. But Mosqueda’s tax would target only salaries of over $150,000, which the companies would pay per employee. Companies with annual payroll between $7 million and $1 billion would pay 0.7 percent on payroll for employees making between $150,000 and $499,999, and 1.4 percent on payrolls of those making over $500,000. Companies with payroll greater than $1 billion will pay 1.4 percent on payroll of employees making between $150,000 and $499,999, and 2.1 percent on payrolls of those making over $500,000.

The tax would raise at least $173.5 million dollars per year, according to the City Council, but it is still unknown how much would be raised by taxing companies with over $1 billion dollars in payroll, Geekwire reported.

Mosqueda’s bill, unlike Morales and Sawant’s bills, does not exempt nonprofits that meet the payroll threshold.

While Morales and Sawant believe Mosqueda’s tax does not go far enough, it has been more widely accepted so far by other City Council members. Councilmembers Herbold and González announced their support for Mosqueda’s tax during the June 17 budget meeting. González said she preferred Mosqueda’s bill as more focused on immigrant and refugee needs, and said it was important City Council come out with a plan for a progressive revenue source.

A broad coalition provided input in creating the legislation. Mosqueda introduced the tax at a press conference that included representatives from Expedia (which the Seattle Times confirmed has not endorsed the tax), Ethan Stowell restaurants, as well as labor leaders representing iron workers, grocery workers and caregivers, and homeless and immigrant rights advocates.

Mosqueda said her legislation builds on business excise tax legislation introduced by Rep. Nicole Macri in the state legislature, which also would have taxed businesses on salaries over $150,000 per year. This legislation, which was supported by Mayor Durkan, ultimately failed.

Mosqueda said her legislation was also helped by discussions with Morales and Sawant about their bill, and feedback from immigrant advocacy groups and small businesses indicating that federal relief efforts in response to COVID-19 were inadequate.

While the legislation from Morales and Sawant is aligned with the Tax Amazon movement, Mosqueda framed her legislation differently, despite the fact that it too would tax Amazon.

“This is not about one company, this is not about one targetted effort. This is about a universal approach to really invest in our local economy,” Mosqueda said during the press conference introducing the legislation. While she did not directly discuss the legislation with Amazon, she said “we are interested in hearing their feedback, just like I’m interested in hearing anybody’s feedback on this proposal.”

While thanking Mosqueda for sharing the goal of raising hundreds of millions of dollars in progressive revenue, Sawant raised concerns during the June 17 Budget Committee meeting about the smaller amount generated by Mosqueda’s tax, and the sunset clause that would retire the tax by 2030.

“How much we can make a dent in racist gentrification in our city is going to be determined by how many dollars we put on the table,” Sawant said. “Given the scope of the housing affordability crisis, I just don’t understand why we should accept this much lower number, other than that the fact that that is the only thing big business is willing to give in.”

But Sawant acknowledged it was promising that the discussions are different than they were in 2018, when the much smaller Employee Hours Tax was passed and later repealed by the City Council. “Look at the conversation we’re having — it is completely on a different magnitude of revenue,” Sawant said. “That shows the pressure on big business.”

Morales echoed the concerns about the smaller amount of revenue generated by Mosqueda’s legislation and 2030 expiration date, saying it is unlikely the state legislature will fundamentally change Washington’s regressive tax structure enough before then.

Morales introduced a new amendment to her and Sawant’s legislation that would allocate ten percent of the funding — around 50 million per year — to the Equitable Development Initiative (EDI), to help finance community-led developments. Morales worried that although Mosqueda’s legislation funds affordable housing, it wouldn’t do enough for affordable community-driven projects that the EDI could help fund. Such projects often come from community organizations led by People of Color, and many of these organizations are based in District 2. Their projects are facing delays from the Office of Planning and Community Development, Morales said.

Uncertainties remain about to what extent Mosqueda’s plan would clash with Mayor Durkan’s proposed budget, which has not yet been announced. Durkan’s plan might also involve tapping into emergency funds to balance the budget. Mosqueda said they will work through the differences once that information is available.

The use of emergency funds for her tax, Mosqueda said, was fitting: “If there was ever an emergency, it is a global public health pandemic that is deadly. It is a recession that rivals a depression,” Mosqueda said. Her tax is an opportunity, she noted, to “invest in the unprecedented number of folks who are unemployed, and our small businesses who, without this assistance, may not recover at all.”

Chetanya Robinson is a Seattle-based journalist