Seattle City Council briefed on controversial proposed payroll tax as proponents and opponents gear up efforts.

The Seattle City Council received a briefing on the payroll tax proposed by a pair of council members. (We have written about it here and here.) The Seattle Times reports,

The tax on companies with annual payrolls over $7 million would apply not only to traditional employers but also to gig-economy businesses, such as Uber, a council central staff analyst said during a budget committee meeting held remotely. Compensation paid to independent contractors, like Uber drivers, would, for the purposes of the tax, be treated like wages paid to employees, analyst Tom Mikesell said.

But franchises, such as McDonald’s, could avoid the 1.3% payroll tax championed by Councilmembers Kshama Sawant and Tammy Morales, because each location would be treated as a separate business, Mikesell said during the council’s second committee meeting on the proposal.

The central staff, which provides nonpartisan analysis for all nine council members, has estimated the tax could raise $500 million a year. Under the Sawant-Morales plan, the money would initially be used for emergency relief, then to build affordable housing and carry out green-building upgrades.

Beekman links to a letter from Who’s Who of Seattle business leaders expressing their opposition to the proposed tax. An excerpt:

This tax would create a ripple effect of harm on Seattle, threatening those with the least margin for injury – Seattle’s small businesses. The negative impacts caused by such a measure would far outstrip the revenue it would produce at a time when our priority should be securing aid from the state and federal government. This type of ill-conceived tax policy will delay our recovery, further deepening city revenue shortfalls. The quickest way to improve our economy and solve the city’s financial situation is to get people back to work.

They offer a list of positive steps the city could take to speed recovery and “rebuild the city’s revenue stream.” The case is solid.

The Times story indicates that the proposed tax faces significant headwinds.

Mayor Jenny Durkan has criticized Sawant and Morales for selling their proposal as a coronavirus measure, because the tax could take effect immediately but wouldn’t be collected right away. Their plan to send $200 million in cash assistance to 100,000 households this year would require Seattle to initially borrow that money from existing sources, such as funds associated with the city’s housing, education, transportation and library property-tax levies and its parks property-tax district.

The city would use the big-business tax to repay those funds later on, with interest, after putting together a system to collect the money. The mayor has described the move as risky and, in an interview with KING 5 last week, she said about the Sawant-Morales plan: “Yeah, that is never going to happen.”

Still, the proposal remains in play.

The council won’t discuss the tax again until May 13, but less-public conversations are bound to continue, likely with Durkan and Councilmember Teresa Mosqueda in leading roles.

Stay tuned.