Seattle City Council is making it harder for businesses to survive

This article originally appeared in the Puget Sound Business Journal on August 3, 2020.

In Seattle, taxes levied by the government are the favored child that can do no wrong. Where other programs are subject to incessant review, and where leadership is held accountable when things don’t go as planned, our tax system is only ever rewarded.

The city council’s latest foray into another business tax is no different. It lacks accountability and leaves Seattle businesses at even greater risk in a time of economic upheaval.

If you give the council a hammer, everything is a nail. In June, the tax on high-earning employees was debuted by the council as a necessary tool to address the pandemic’s effects on the city. Despite previous failed attempts to pass a new business tax that resulted in public backlash, this new payroll tax was framed as a Covid-response measure.

The truth, however, is that the revenues would go toward a variety of programs not limited to the pandemic. As with other previous failed attempts, the revenues from the new tax would be spent in a number of ways, appeasing many special interest groups constantly pressuring the council for more funding.

Businesses in Seattle are no strangers to the state’s unbalanced tax system. Remember, it was only last year that the Legislature raised business tax rates across the board during a time of economic growth. The effort even earned the support of many employers who recognize the breadth and depth of the challenges facing the state.

However, in their rush to push through their long-sought new business tax, the city council abandoned businesses while they are struggling to stay afloat.

Consider how we’ve treated tax cuts in the past.

When the Bush administration pushed through two massive tax cuts early into the president’s first term, liberals warned of their likely effects. We high earners were immediate beneficiaries, but the promise that the cuts would pay for themselves through economic stimulus proved false, and the deficit ballooned.

The cuts, however, came with an expiration date set for 2010, forcing Congress to review the effectiveness and to make some decisions. In the end, President Obama made permanent the tax cuts to low- and middle-income earners. The cuts for the wealthy were allowed to expire.

New revenues should be treated similarly.

Originally, the council’s proposed tax actually included a degree of accountability that could have been acceptable to a broad group. A “sunset clause” would have required the tax to be renewed in 10 years or expire — not unlike the levy system we pay through our property taxes to support a variety of government programs.

Like the Bush tax cuts, the expiration date would give the public a set of quantitative data to inform our decision-making. Instead of reassuring the business community, which is struggling to stay afloat and keep workers employed during the downturn, the council stripped the sunset clause altogether, adding it back only after dramatically watering it down.

Other language included in the bill indicated that the council would “monitor the landscape” and keep an eye out for other similar business taxes in the region. This was purportedly added to assuage skeptical employers who feared getting pummeled by other new taxes at the county or state level.

That begs the question, what do they intend to do if our businesses get double- or triple-taxed? What does “monitor the landscape” mean? It feels to me like a “neighborhood watch” with a squirt gun.

When we make generational investments, we do our best to analyze the risks and rewards before leaping forward. This new and radically untested tax received no rigorous debate. Some leaders in the city and state, the mayor included, are already questioning the council’s action at such a difficult time for businesses and for workers.

Without a serious study where we can hear from the businesses who would be affected, how can we be confident that it will work as proposed? Without a mechanism to study its impact, how can we make any necessary improvements? Most importantly, how many businesses on the brink of shutting down permanently can afford a new tax? Where is the accountability?

The pressure by the council to find revenue to fill the gap caused by the drop in sales tax collections is understandable. The business community is on the front lines of the economic turmoil and understands this gaping hole in city revenues. The council had an opportunity to bring all sides together and craft something that everyone could get behind.

Instead, the majority of the members took a leftward lurch, making themselves unaccountable in the process, and throwing our local businesses to the wolves.

The last time that I’m aware of business being a part of the solution was during Mayor Ed Murray’s minimum wage commission. The council should use that as a guide.