UPDATED Proposed Seattle payroll tax: Is there anything it can’t do?

Update: Since we posted, we found this TJ Martinell report in The Lens identifying strong business and labor opposition to the proposed tax. Also, this op-ed by Seattle City Councilmember Alex Pedersen and economist Matthew Gardner giving 10 reasons to say no to the tax.

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Backers of a proposed Seattle payroll tax now see it as a revenue cure to the pandemic-induced $210 million to $300 million hole in the city budget. The tax, which many have seen as a cure in search of a problem, has now found a new problem. One hammer, many nails.

David Kroman reports in Crosscut,

In 2018, when City Hall erupted in a messy fight over a proposed “head tax,” proponents argued the new funds were necessary to fight homelessness, despite exponential growth of the city’s tax base. Another proposal surfaced earlier this year as the Legislature considered funding for homelessness programs.

Now, for the first time in nearly a decade, the city’s budget is contracting and a population that has grown accustomed to microscopic unemployment rates is increasingly out of work. On Tuesday, the city’s budget office projected up to a $300 million shortfall as a result of the coronavirus’s economic hit by year’s end. In the worst case projection, the city’s unemployment rate could hit 18% by year’s end and incomes could sink by 12.5%.

The pandemic provides a new argument for the old head tax.

For proponents, the tax is cast as a widening of the social safety net at a time people are suffering. In fact, it’s written as a piece of emergency legislation — which, as reported earlier by SCC Insight, shields it from a voter referendum — in response to the COVID-19 outbreak.

Business leaders think the proponents have it backward.

But while Sawant and Morales argue the coronavirus pandemic makes a new tax more necessary, the business community argues the opposite, that it will hurt the economy’s ability to bounce back.

“We’ve got some strong headwinds already to face, and I think this will set Seattle on a really dangerous course compared to other cities in the region,” said Jon Scholes, president and CEO of the Downtown Seattle Association.

And so it goes. Kroman writes that the tax proposal will morph as it goes through the council process. And, he says no vote is expected until at least May 13.