In Seattle, a tax on big business is now more possible than ever

The passage of Tim Eyman's car-tab initiative underscores the need to right our upside-down tax system. Here's how to enlist Amazon in the cause.

Head tax supporters

Proponents of the head tax wait in line prior to a city council vote that repealed the head tax at City Hall in Seattle, June 12, 2018. (Matt M. McKnight/Crosscut)

Gloating is not the noblest of attitudes, but since Thursday I’ve been savoring a very particular imagined scene. It begins the morning after election night, in a board room on the top floor of an office tower in South Lake Union, no doubt with panoramic views of the city and the mountains beyond. Amazon’s “S Team” convenes to assess the return on their $1.45 million investment in the Seattle City Council elections: “Well, guys, the results aren’t what we hoped. But at least we got rid of the socialist.” Cut to the following afternoon, same set, right after the dramatic shift of the third ballot drop turned Councilmember Kshama Sawant’s victory from a long shot into a strong probability. I can only imagine the alarm in their eyes.

That same afternoon The Seattle Times editorial board tried valiantly to project a sense of victory, but mainly sounded weak and exhausted. Their whole narrative strategy — casting progressive candidates as part of a failed status quo in a city ready for change — simply didn’t work. Instead, Seattle voters planted their feet on the ground, let an unprecedented $4.1 million in political action committee money and independent expenditures wash over them, and selected the candidate more to the left in six out of seven races. We won.

And yet, on another front, all of us lost together. Amid the division and rancor, socialists, big business, labor unions, community and advocacy groups, local governments and even The Seattle Times editorial board all locked arms in opposition to Tim Eyman’s car-tab measure, Initiative 976. Many of us who condemned corporate spending in the council races also breathed a sigh of relief when television ads paid for by Amazon, Microsoft and Vulcan finally hit the airwaves, showing voters the havoc this measure would wreak on our transportation system, commerce and communities around the state. “Keep Washington Rolling” spent nearly $4.5 million, but it was too little or too late. Eyman, running no campaign at all, won handily.

Now the lawsuits are starting, and we can all hope that victory in court will evaporate our worst fears. But if the measure is upheld and if the funding lost is not replaced, the consequences will be dire. Bus service will be cut in Seattle and other cities. Access Paratransit service, a lifeline for many disabled riders, will deteriorate. Funds for pothole repair and transit capital improvements will dwindle. Sound Transit will lose nearly $7 billion, threatening the long-awaited expansion of regional light rail. Ferry improvements, Amtrak service, construction and maintenance of bridges and roads, as well as road safety projects across the state, are all at risk.

A political opening for tax reform?

But the passage of I-976 was not a vote against transportation or public transit. The ballot title made no mention of the measure’s impacts; it merely promised to slice car tab fees down to $30. This was an anti-tax vote, pure and simple, driven by voters outside King County and Seattle, which roundly rejected the measure. And here’s the thing: Most of the people who voted for I-976 are right to feel overtaxed, because they are.

Washington is a “low tax state” in terms of revenue collected (hence our trouble funding basic services), but for low-income families it’s the highest-tax state in the country. It’s no picnic for the “middle class,” either; only for the wealthy is Washington a tax haven with gorgeous natural surroundings. Our tax system has been ranked the most inequitable in the nation for some years running. Ultimately, I-976 passed because people are struggling to pay their bills. Taxing car ownership makes a lot of sense from a climate-crisis perspective. And yet it’s hard not to feel sympathy for the low-income single parent or low-wage shift worker, for whom public transit may not be a viable option, hit with a lump-sum charge in the hundreds of dollars upon renewing their tabs — a sudden punch in the gut, in contrast to the slow, almost imperceptible bleed of the sales tax.

Amazon had an obvious stake in persuading people to keep paying top dollar for those tabs. The Bezos plan for world domination depends on getting products to your door fast, and until the drone armies come online, that means traffic congestion is the enemy. Amazon wants our region to have a world-class public transit system, not only to carry its 50,000-strong-and-growing workforce to work, but also to free up the roads for AmazonFresh, Amazon Prime Now, Amazon Flex. This isn’t the first time Amazon has helped mobilize the pro-transit vote. The company’s first significant forays into our local politics consisted of campaign contributions to King County and Seattle bus service measures in 2014, the Move Seattle Levy in 2015 and Sound Transit 3 in 2016. Amazon’s half-million dollar spending this year was about protecting those investments.

But it was something else, too. It was an effort to preserve the status quo — to keep our tax system just as it is. Our collective failure to halt I-976 at the ballot is devastating, but it does create a political opening, a chance to rethink how we pay for things. And no one is better positioned to advance that conversation in a tangible way than Seattle’s new city council.

Tim Eyman's car-tab initiative, which garnered significant support outside King County, blows a hole in Seattle's transportation budget. Lawsuits are already challenging it, but if the measure is upheld, the consequences across the state will be dire. (Jason Redmond for Crosscut)

The case for taxing big business

Tim Eyman just blasted a hole in the city’s transportation budget that’s the shape of an $80 car-tab fee, and the new council will play a large role in figuring out how to fill it. Luckily, there’s a natural opportunity coming up to raise new money for transit. Seattle Transportation Benefit District Proposition 1, which funds a good chunk of the city’s bus service, will expire at the end of next year. This accounts for $60 of those car-tab fees, plus a 0.1% sales tax, totaling about $50 million per year. The obvious choice for replacing those funds is to double down on the sales tax by asking voters to raise it to 0.2% — but that would only extend funding at the current level, while also making our tax system even more regressive. If we’re at all serious about climate change and transcending car culture, not to mention plugging other holes left by I-976, we should look to a much bigger measure.

So why not tax big business instead? Several U.S. transit agencies, including Portland’s TriMet and New York City’s Metro, are funded partly through employer taxes. And Seattle has options. Sure, there’s the controversial “head tax,” which could be made more palatable by raising the exemption threshold to $50 million in gross receipts or even higher. But how about an employer-side payroll tax? Not many people remember this now, but last year’s big business tax legislation, as first introduced before Amazon negotiated it down, would have shifted to a payroll-based tax as soon as the city could set up the administrative apparatus. That’s a more progressive option than a flat “head tax,” since tech and other corporations that employ high-paid workers would end up paying more per employee, while low-margin businesses like grocery stores would pay less. No wonder Amazon didn’t like it. With a vote of the people, the city could also restructure its existing business and occupation tax to make it more progressive, then raise the rate for the largest corporations. Finally, Seattle could follow in Portland’s footsteps and design a tax based on excessive executive pay.

‘The man for the job’

And which councilmember should champion this cause? It would seem natural for leadership to come from within our new seven-member progressive supermajority. Perhaps Tammy Morales, who has already expressed a commitment to local tax reform. Or maybe Sawant, who has never ceased the call to tax Amazon and is now the council’s senior member. But I have a different idea. I think Alex Pedersen is the man for the job.

Earlier this year, during the primary elections, I kept hearing that Pedersen had opposed Sound Transit 3. He was racking up endorsements from the Seattle Metropolitan Chamber of Commerce, the Washington Technology Industry Association and The Seattle Times editorial board, so it was natural to think of him as the candidate of big business. Imagine my surprise, then, when I finally learned Pedersen’s stated reasons for opposing the measure. In a post on his since-deleted neighborhood blog he wrote:

“We want more extensive public transit, but should Big Business get a free ride while the poor pay more? Of course not. Shockingly, that’s exactly what the $54 billion Sound Transit 3 (ST3) ballot measure would do. ST3 would shovel unfair, regressive taxes onto the people while several large corporations reap the benefits. … The only way to make the politicians listen is to put our foot down. REJECT AND RE-DO SOUND TRANSIT 3: MAKE CORPORATIONS PAY FAIR SHARE.”

Unless Pedersen has had a serious change of heart since 2016, he could prove a more uncompromising champion for progressive taxation than Seattle’s most famous socialist. Around that same time, Sawant spoke in favor of a city council resolution supporting ST3, noting the measure’s unfortunate reliance on regressive taxes, but concluding that “Sound Transit 3 is a really important increase in transit and so it is absolutely critical that we all as voters support this initiative.” So moderate, so pragmatic! So, today I’m putting my money on Pedersen. In the fervor of the elections, some of us may have misjudged him. Now he has a chance to prove his big-business-tax-for-transit bone fides.

The path to an income tax

But maybe you’re not convinced yet. Maybe you believe taxing business is just a bad idea. Sure, we need to fix our upside-down tax system, you might think, but the right way to do that is through a progressive income tax. If that’s your opinion, then hear me out, because I think a Seattle big business tax in 2020 might just be our best means to that end, too.

Seattle already has a progressive income tax on the books — a 2.25% tax on individual income in excess of $250,000. (Full disclosure: I was involved in the campaign for this tax in 2017 through my work with the Transit Riders Union.) The Washington state Supreme Court is expected to rule on this contested measure in late 2020 or early 2021, and it’s looking remarkably good. If Seattle prevails in court, wholly or in part, state and local incomes taxes could have a legal stamp of approval for the first time in over 80 years.

This is sure to set off a political firestorm, and it would be really great to have Amazon and other big business interests on our side. History, however, is not promising in this respect. When a progressive income tax appeared on the state ballot in 2010, Jeff Bezos and Steve Ballmer were among the top five contributors to the victorious opposition campaign. Our best chance to secure their support, I think, is to make it crystal clear that progressive tax reform is happening one way or another, at least here in Seattle. If they don’t want taxing big business to become our go-to progressive revenue source for all public needs, then they’d better help us with the income tax.

For this strategy to work, a business tax needn’t be for transit. Seattle has other revenue needs just as urgent: affordable housing, homelessness and a Green New Deal all come to mind. We should begin next year with a robust public discussion, not about whether to pass a big business tax, but what kind and what for. And it should be big — seriously, let’s take San Francisco’s recent $300 million measure as our model. The council could act, or they could put it to the voters in November. In fact, I want to see as many bold progressive measures on the ballot next fall as possible. Let’s take full advantage of what’s sure to be a high-turnout, high-energy election, and as Tim Eyman likes to say, “Let the voters decide.”

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About the Authors & Contributors

Katie Wilson

Katie Wilson

Katie Wilson, a contributing columnist, is the General Secretary of the Transit Riders Union.