RapidRide bus (6051) on a non RapidRide route

Seattle’s transit infrastructure is years behind what it should be to accommodate current ridership, let alone the thousand or more human beings sinking roots in our city every month. The Move Seattle levy, assuming voters approve it in November, will be a good step forward – but we’ll still be playing catch-up.

What if Seattle had another $20 or $30 million per year to accelerate the build-out of transit corridors and other BRT-related capital projects in the Transit Master Plan, and maybe add more service to boot?

Seattle can make it happen. With a little political will on the part of our City Council, Seattle can generate significant revenue from a progressive and comparatively stable source: a new-and-improved Employee Hours Tax (EHT). Let’s glance over the recent history of this tax before considering how to refashion it for today.

History of the Employee Hours Tax

The Seattle City Council first approved an EHT in 2006, along with a Commercial Parking Tax. Both complemented the Bridging the Gap levy, and were also slated for transportation maintenance and improvements. The EHT required businesses to pay a modest $25 per full-time employee per year, exempting small business and employees who didn’t drive alone to work. Over the 9-year lifespan of the $365 million property tax levy this would have brought in an extra $50 million or so.

In 2009, one year into the Great Recession, the city council repealed the Employee Hours Tax. Although $25 per employee wasn’t enough to actually discourage hiring (Councilmember Tim Burgess call the repeal “somewhat symbolic”), business groups complained the tax was hurting the reputation of Seattle’s business climate. Led by Burgess, then-Councilmember Richard Conlin and then-Mayor Greg Nickels, and despite resistance from sustainability advocates and groups such as Cascade Bicycle Club that saw no reason to forego millions in bike and pedestrian improvements for a symbolic gesture, the city council conceded.

Fast forward to spring 2014, when King County’s Proposition 1 went down in flames. As Seattle prepared to take action to save bus service, Councilmembers Nick Licata and Kshama Sawant teamed up to revive the EHT. Rather than simply rerunning the county’s ballot measure in Seattle, they proposed replacing the regressive sales tax hike with a 5% Commercial Parking Tax increase and an EHT set at a very modest $18 per worker per year, or less than a penny per hour. Interestingly, this EHT was projected to raise $7 million per year, significantly more than the repealed version, which in 2008 generated only $4.5 million. While the Licata-Sawant proposal also exempted small business (up to the current B&O threshold of $100,000), it dropped the exemption for employees who do not drive alone to work. This change wound not only increase revenue but also make the tax significantly easier to administer. In the end, to no one’s surprise, the council rejected the Licata-Sawant proposal 2-6 and Seattle’s Prop 1 went to the ballot in its original form.

The following year – that’s this past spring, 2015 – when all eyes turned towards the Mayor’s proposed Move Seattle levy, the stage was set for another try. Councilmember Licata raised concerns about how voters would respond to the $930m price tag, coming amidst a volley of property tax measures: parks and preschool, transportation, and later the Seattle Housing Levy, which the HALA committee recommended double in size on the 2016 ballot. And so Licata and Sawant proposed a diversified funding approach, bumping the median property tax bill down from $275 to $175 and making up the loss through $100 million in development impact fees and the same combination of a Commercial Parking Tax increase and an EHT.

This second revival effort also failed 2-7, but significantly, most of the council expressed support for an Employee Hours Tax in principle. Mike O’Brien and Tom Rasmussen  stated that it’s not a question of if we use the EHT, only when and what for. Bruce Harrell has expressed support. In a meeting with the Transit Riders Union, Burgess said he could support the tax if it is tied to congestion by requiring employers that bring commuters into high-traffic areas to pay more. The general refrain during council discussions was that the EHT shouldn’t be used to displace other funding mechanisms, because Seattle’s unmet transit needs are so deep we’re eventually going to need all the options.

I believe it’s time to start using this one now. Every year we wait to pass a robust Employee Hours Tax, we lose millions of dollars in progressive revenue that could be building the world-class transit system Seattle so desperately needs. So let’s pass an EHT and, while we’re at it, let’s make it good. Here are some initial thoughts on what that means.

A Robust Employee Hours Tax

  1. Congestion Zones: The Employee Hours Tax is a flexible tool, since it arises from Seattle’s general business license authority (RCW 35.22.280 (32)). There is no cap, and nor is there any requirement that the EHT be uniform for all businesses. So as long as there are sound policy reasons for it, per-employee rates could vary by geographic area or even type of business. The idea of carving Seattle into several “congestion zones” – e.g. low, medium, high – as suggested by Councilmember Burgess makes a lot of sense. Businesses like Amazon, whose rapid growth in already congested areas is contributing to gridlock, will also be contributing more to transportation improvements to tackle this problem.
  2. Exemptions: The big difference between the EHT that was in effect from 2006-2009 and Licata-Sawant proposal is that the former exempted employees who do not drive alone to work, whereas the latter would not. I believe the Licata-Sawant approach is superior, for three reasons. First, it will generate a lot more revenue. Second, this exemption made the first EHT complicated to calculate and difficult to enforce. Third, it did not effectively accomplish its main intent, which was to discourage single-occupancy commuting. This was partly because the tax was so low ($25 was not enough to act as a disincentive, as Conlin pointed out), but also because the incentive was indirect: driving alone is the employee’s choice, not the employer’s. If we want employers to make it easier for their employees to choose non-SOV commute options, we can accomplish this more directly by strengthening Seattle’s Commute Trip Reduction Plan. In the case of the EHT, congestion relief will come in the form of the better transit system built with the revenue – and it makes sense for employers whose employees use this system to contribute too. On the other hand, for obvious reasons the EHT should exempt small businesses, and in the interest of administrative ease the threshold should be consistent with the B&O tax.
  3. Revenue Target: A new EHT should not be so small as to be merely symbolic – it should raise significant revenue. I propose a minimum target of $20 million per year. An average tax rate of $50 per employee would generate nearly this much; an average of $80 would generate over $30 million. Yes, business groups will say this is too high. But to keep things in perspective, remember that $80 per FTE per year works out to just over 4 cents per hour. With Seattle’s minimum wage climbing stepwise to $15 in two-dollar increments, it’s hard to believe that a few extra pennies for transit is going to push things over the edge. Also remember that regular transit riders (including low-income youth, senior and disabled riders) have just been asked to pitch in an extra $108 per year, and Access riders an extra $204, due to fare increases.
  4. Dedication: How to use the money? At the outset I suggested making strides toward Bus Rapid Transit – an emphasis on capital improvements, maybe coupled with some service hours. If the goal is to keep the whole package clearly tied to congestion, this is undoubtedly the best choice. But there are many other possibilities. Seattle’s late-night service needs a serious boost, for instance. Or we could fund some of TRU’s affordable transit goals, like a free pass program for low-income youth, seniors and people with disabilities. I wouldn’t rule out bike and pedestrian improvements, either. I’m interested to hear more ideas.

A Political Path

So, how and when is this going to happen? I would love to see a robust Employee Hours Tax passed before the end of this year. Given that most if not all of the current council has expressed support for this funding option, I think we should push them to act.

If this year proves too short a timeframe, at the very least we can get a Statement of Legislative Intent in the budget so that consideration is assured for next year. The city is already in the process of studying transportation impact fees, and much of this analysis could be made relevant to an EHT. The impact fee study is funded through the end of this year, and the Mayor is expected to propose additional funding to extend it into 2016; the city council could condition these funds to ensure that the analysis also covers a congestion-zone approach to an EHT. A well-designed EHT could end up being a tool far superior to impact fees, which must be tied to current development and are far more restricted in use. If needed it could even be re-branded (how about an “Urban Impact Fee”?) to shift the emphasis away from employment and towards the impact of growth.

One way or another, the EHT is a progressive revenue source Seattle can’t afford not to use. So let’s bring it back, and let’s make it good this time.

Katie Wilson is General Secretary of the Transit Riders Union.

69 Replies to “Let’s Bring Back the Employee Hours Tax, and Make it Good This Time”

  1. For Sure!

    Starting with a KIRO TV Jessie (Get Jessie!) Jones appearance at pm rush hour in South Lake Union.

    Questioning certain local exec about statements that they’re forced to provide huge parking because public transit is so spotty.

    And then the camera flashing to public streets becoming parking lots as private underground corporate ones disgorge.

    And finishing with an interview with Jeff Bezos himself backgrounded with realtime footage of the streetcar he personally donated at the back of a quarter mile of cars.

    Then, publicly offer Jeff a trillion dollar exemption from all taxes on condition he converts those Cold War-style car shelters to a cave spelunking annex to the REI climbing section.

    Or fills them with concrete so Amazon can truly be the only corporation left standing to repopulate the whole business world after The Big One. (Tell me Amazon isn’t setting up to do that as we speak.)

    Desperate times. desperately overdue measures.

    Mark Dublin

  2. You’ve convinced me that the EHT is legal under current law, and agree that we should have a yes AND approach in transit financing. I’m also glad to hear Burgess’ inspired idea of the different congestion zones for funding levels.

    I, however, worry deeply about the intention of posting here. Here’s my prediction: both Councilwoman Sawant and hopeful Jon Grant will come out with a proposal suspiciously similar to the one outlined here and we’re meant to go “oh! they’re good on transit!” as though we’re supposed to forget they’re both terrible on transit and land use policies.

    I guess we’ll see.

    1. There is nothing sinister or wrong with two different organizations (Seattle Transit Blog and the Seattle Transit Riders Union) having different priorities and making different endorsements.

      Sure, I would love for Sawant and Grant to state publicly that they support the HALA recommendations for allowing single-family homeowners to build more structures on their property and allow more people to live there. The candidates who came out against those recommendations lost badly in the primary, even in single-family zones (where I think voters got it that the NIMBYs of the world were trying to tell them too much what they could and could not do with their own property).

      On issues of improving housing affordability, Sawant’s and Grant’s platforms leave a lot to be desired. Burgess didn’t do himself (or the voters) any favors by backing off the obviously-less-unpopular-than-the-NIMBY-candidates-would-have-you-believe single-family-zone proposals in HALA. Grant could bust a move and come out in favor of those recommendations, and maybe even win the election by doing that, by showing himself to be simultaneously wise and courageous. It’s not as if the hardline NIMBYs will suddenly back Burgess.

      Sawant’s weakness on transit is largely about willingness to scuttle needed transit measures if she doesn’t get her favorite funding mechanism. But so far, that willingness has merely moved the Overton Window, and possible opened up additional funding sources, but not involved her coming out against any funding measure.

      1. I didn’t say that there was something sinister. I’m contending that the transit rider’s union wrote this post to try to make us think Sawant and Grant are good on the issues we care about when we know that they’re not when they come out with a plan similar to this.

      2. Adding triplexes, townhouses, row houses, courtyard buildings and stacked apartments to single-family zones would put a target on lower-income neighborhoods where the land is cheapest. It would be a favor to developers and would not create any affordable housing units. There is and would be a net loss of moderate-rent units in older buildings, including the 20% of SF homes that are rented.

    2. Posting here is merely a “This is an idea worth considering”, not an endorsement. Official STB opinions are signed “by STB Editorial Board”. The blog is increasingly becoming the place to post transit viewpoints by external individuals and groups even if STB doesn’t 100% agree with them or is undecided, and that’s a good thing. It reinforces STB’s position as the place to read about all the transit viewpoints, it brings them to us so that we don’t have to go looking for them, and it gives the ideas the most through vetting they can get in this town.

      I think the problem is that STB is becoming more like a newspaper, and many blogs are not like that. Many blogs just voice the opinions of their owners and nothing else, so every article is assumed to be the owner’s opinion. But people don’t expect that of Seattle Times articles, or Publicola, or the Capitol Hill Times, etc. Part of their job is to report on things that are happening and viewpoints that are making headway, whether or not they agree with them. And in this era of complex political decisions, it may take some time and several articles for people themselves to decide whether they agree with something.

      In light of that, perhaps STB should be called “Seattle Transit News” instead of blog. That would make it clear that it has both editorial articles and other articles. But it’s probably too late to change the name, so I guess the message has to be, “Not all blogs are the same.”

    3. I’m not a huge fan of Sawant or Grant, but if they have good ideas to increase resources for transit we should applaud that. I’m certainly not about ignoring good or interesting proposals because they’re not from “our guy.”

      1. We’ll see, but the TRU posted around 1,000,000 signs along all bus stops shilling for Grant [and Sawant in smaller print]. They seem to have one current goal in the short term, and thus I think they have an alterior motive in posting here, and we’ll see what it is…

      2. My crystal ball says they want to get candidates elected who they believe support their policy goals. STB does that too. TRU just happens to put a heckuva lot more work into doing it.

    4. Sawant’s weakness on transit is her unwillingness to categorically prioritize transit and density as part of the solution. She may be getting there; her recent statements have been more positive, but not enough to be clearly reliable. The “liberal/progressive” position has split into two, with some supporting transit/density/new non-market-rate housing as the best way to help the poor, and others supporting slow-growth, abundant parking, and low car/gas taxes as the best way to help the poor. Sawant may be moving toward the former position, but she has been more of the latter in the past and there’s still the danger that she might be sucked back into it in the future.

      1. I’d be curious to know where you got that opinion of Sawant’s take on transit issues from. I know anytime I’ve heard her speak she’s mentioned transit as a priority, and I’ve never heard anything about abundant parking or being pro-car. So I’m genuinely curious. If you look at her current positions, it seems pretty solidly pro-transit:

        http://kshamasawant.org/expand-public-transit/

      2. I’m going by her past statements and votes while on the council. Her support was lukewarm on Prop 1, Metro reorganizations, and walkable density. She focused too much on car-tab prices (Prop 1 is equivalent to half a tank of gas per year, for tons of bus hours that help poor people get around and not need cars as much.) She didn’t understand the merits of consolidating routes to create more full-time frequent corridors, instead sticking up for legacy routes and one-seat rides. She hasn’t been great on expanding the urban villages to ensure more people can live within walking distance of stations, or upzoning in her own area (the Central District). In most of these cases she was “OK” rather than “bad”: she didn’t impede inevitable tradeoffs and the long-term necessity of urbanization, but I wish she had supported them more.

        I didn’t see her campaign platform until now so I don’t know if it was the same during the primary. It’s basically a “make the rich/developers pay for a massive increase in transit and lower fares”. I like the massive increase in transit, and her explicit support for Seattle Subway. But when it comes to details and tradeoffs and upzoning, I’m never sure which way she’ll go, and I’m afraid that a John Fox-type opposition to density may emerge. Again she’ll probably be “OK” on these issues (I hope), but I’d prefer a councilmember who was more decisively for them.

  3. Even with all the levies, many large property owners will be paying far less Property Tax (based on all the value increases of the past two decades) than they should.

    Instead of trying to pick the pockets of people trying to move up the ladder, or just pay the rent, with salary, go after the Land Hogs that get far more reward from a productive city like Seattle.

    1. Who are these “Land Hogs”? People trying to build tall towers on small plots of land, or someone living in a Craftsman house, and unable to build a mother-in-law cottage on his own land, … because a small set of vocal busybodies won’t let the City let him?

      1. The guy living in the Craftsman house; a tall tower provides housing to far more people per square foot.

        I mean really, neither of them are necessarily land hogs, but I have no idea why you would insinuate that a company trying to fit MORE people onto a given parcel of land is a land hog. That’s, like, the opposite of land hogging.

      2. Yes, Neil, that’s my point.

        Seattle homes — the standard Craftsman plot — are already small. Remember, these now upper middle class homes used to be worker housing! The places where the sooty laborers from Gasworks used to live.

        While all the attention is on making people living in tiny plots and homes sometimes with families or with multiple adults each with only a bedroom, other vast holdings go unexamined (and under taxed..thought they often occupy land that is prime, such as waterfront, and now priced at millions of dollars!)

  4. Administrative cost with the prior employee hours tax was a nightmare. Under your proposal, would “small business” be defined in terms of the number of employees or the gross revenue? Would self-employed people need to start tracking their hours and submitting time-sheets to the city? Would people who work from home be exempt since they are not contributing to congestion? What about people who travel around the region for work…would only their hours in Seattle count? I’m not against the concept, but don’t assume that every employment situation fits the traditional model. Careful thought needs to be put into the details before any new policy is implemented. The failure to do so the first time around was a major reason the prior tax was repealed.

    1. Indeed. I can imagine this costs businesses far, far more than $25/employee just in time wasted with paperwork. Governments never seem to think about this when they impose taxes and regulations.

  5. Burgess said he could support the tax if it is tied to congestion by requiring employers that bring commuters into high-traffic areas to pay more.

    Can someone explain to me how Burgess’s proposed modification doesn’t incentivize sprawl? High traffic areas are also high transit areas, for the most part. A tax incentive to put jobs in the middle of nowhere makes people much more likely to drive alone to work.

    I generally assume Burgess is pretty sound on density/sprawl issues, so I’m open to the possibility I’m missing something here.

    1. That’s my worry as well. On the one hand we are saying “build within the Urban Core areas we have outlined”, and on the other hand we are saying “BTW taxes are higher there.”

    2. Our transportation infrastructure is not keeping up with demand. We’ve been ignoring that little part of GMA that calls for concurrency. There is nothing at all wrong with asking people to contribute to the infrastructure needs made worse by their actions.

      And we need to also recognize the vast range of differences between an urban center that’s over-capacity (e.g. South Lake Union) and sprawl. There are lots of under-filled urban centers and urban villages, both in Seattle and the near suburbs, that have room for development, without contributing to sprawl at all.

      1. Of course, a lot of people that work in Northgate or Shoreline drive through more congested areas to get there.

        Meanwhile literally the only thing that’s truly over-capacity in most parts of Seattle is road space for cars. Peak-hour transit is sometimes over-capacity, but the amount of time buses waste stuck in traffic contributes significantly.

      2. The facilities aren’t always there, though. A friend of mine was in charge of finding a new office space for her business. It was down to Pioneer square, or a couple of spawl-y office parks on the East Side (she went with the latter, to stave off an employee rebellion over parking). I asked if she’d looked in other Seattle neighborhoods, but she wasn’t able to find a space that met her needs.

        At any rate, taking jobs out of the downtown core and putting them in neighborhoods means more cars on the road, given the nature of our network–you can get downtown, especially for a regular workday schedule, from almost anywhere by transit; other neighborhoods not so much. This is reflected in commuting data for people who work in those locations. So it may not result in sprawl in the classic sense, but’s definitely contributing to greater congestion and pollution to push jobs out of the downtown core and into the neighborhoods.

        (Besides isn’t your preferred plan is to cram all the new residents into urban villages, protecting exclusionary zoning now and forever across 2/3 of the city? Won’t greater competition for space with more offices just drive up the price of housing further, while enriching current single-family home owners for doing nothing but buying an artificially scarce resource at the right time?)

  6. Is there any incentive for employers to provide transit passes to all their employees? Wouldn’t that get at the issue Burgess is trying to deal with, without the unfortunate perverse incentives from his proposal, and perhaps even reduce the administrative cost of this tax?

      1. We should be heavily taxing parking spaces (and I believe we are), whether they are available to the public or not, in congested areas. Those parking spaces are a major cause of the congestion.

    1. I agree. Though it would be nice to have another stable source of revenue to fund transit projects, we don’t want to incentivize moving companies to the suburbs again.

      Generally the idea of a congestion tax sounds good to me though. Tolling SOVs at the entrance/exits to congested areas like downtown sounds better to me. I’m not sure if we could manage it though.

      We want to simultaneously decrease traffic and fund more transit. The proposed head tax might encourage companies to move to other parts of the city (or region) which could make serving them with transit more difficult.

      1. A combination of a congestion charge for central areas and a small gas tax increase should address both issues. More expensive gas discourages mileage while congestion charge discourages driving in congested neighborhoods.

        I am afraid both of these ideas are a political no-go.

    2. Transit fare subsidies are an approved “element” of the CTR requirements in Seattle. Unfortunately, so are a lot of other “elements.” An employer’s CTR program only needs 2 of such “elements” to be in compliance. A company that offers “preferential parking for HOVs” and attends “4 meetings of a local transportation management association” but also has free/subsidized employee parking is just as compliant with CTR as a company with free transit passes, bike locker rooms, and market-priced parking

      Simply revising CTR to eliminate all of the low-value “elements,” or make it some sort of points system where the high-impact activities have a greater value towards compliance with CTR, would be a lot more logical. Add a bonus for walking to work (say, those who live within 1 mile of the office) and a penalty for providing free or subsidized parking in a congested area.

      1. +1 for beefing up the CTR. Employers who provide ORCA Passport for their employees are already paying a $700/employee/year “head tax” to fund transit. Which is great! I’d much rather see more employers buying ORCA passes for their employees. Win/win.

  7. This is a dangerous idea. Not every company is like Amazon and rapidly growing. Many are maintaining, or even shrinking their presences in Seattle. The rapidly rising cost of office space makes Seattle increasingly uncompetitive for non-tech companies.

    I work in the Seattle office of a large non-tech company that has employees all over the U.S. My job can be done anywhere – it doesn’t need to be in Seattle. If my company moved my office elsewhere, it would get substantial tax incentives from state and local governments. Another division of my company received millions of dollars to do just that.

    Seattle will not give companies tax incentives to stay. Nor should it. But the reality is that other governments will give large incentives to companies that move there. Raising taxes on Seattle employers just tilts the scales that much further in favor of moving away, a fact other cities will not hesitate to point out.

    1. Yeah, I’m generally pretty suspicious of arguments to the effect of “sure, this tax disincentivizes something we want more of, but it’s too small to have any actual disincentivizing effect, so don’t worry about it.” We don’t know precisely where various decision-makers margins are, and how close we are to them. Even if it’s basically true today, that may change before we have a chance to rethink the incentive structure we’re creating. The same worry goes for linkage fees. I’ve got no problem at all with a high tax environment, but let’s focus those taxes on either things we want less of (parking and cars, for example!) or are neutral about, rather than things we want more of, like housing and jobs.

      1. It’s a fallacy to believe that a one-time 5% linkage fee (not a recurring tax) that would be part of the capital cost of thevproject, financed over the life of the building, would mean less housing. Every one of the surrounding municipalities charges such a concurrency fee for infrastructure. Kirkland charges an 11% impact fee. The choice is to ignore our school construction crisis and to fall farther and farther behind in parks and roads. The only truly affordable housing is subsidized multifamily housing. Every TOD should include low-income housing. Urbanists need to add an economic justice lense.

    2. As what is essentially a local payroll tax, it seems to me all this would do is increase the amount of local taxation that your employer deducts on their federal income tax.

      1. A deduction, however, is not a credit. ~65% would still be felt by the employer if it pays the full 35% federal corporate rate.

  8. >> the EHT is a progressive revenue source

    In what way is it progressive?

    If you mean that this is a progressive tax, by the common definition of the term (https://en.wikipedia.org/wiki/Progressive_tax) then you are simply wrong. There is nothing progressive about this. This is simply a tax on each employee. The guy that gets paid minimum wage gets taxed exactly the same as the guy who gets paid a million a year. It is actually a regressive tax. It is more regressive than a sales tax. It is similar to the tobacco tax in its regressive nature. But at least with the tobacco tax, the whole point is discourage the use of tobacco. Why on earth would we want to discourage employment?

    Then there is the paperwork involved, which is harder on small businesses. I would guess, in general, the small businesses make less money. The local bar or restaurant may have an owner and two employees, all of whom make fairly low incomes. The paperwork cost of this would thus be regressive as well (companies like Amazon have owners who are either richly compensated, or never actually do work for the company).

    This is a terrible tax, yet the most common argument made for it is that it is small. You can say the same thing about the sales tax. Just one tenth of one percent raises plenty of money. Most people will never even notice a raise in the sales tax. Will you now claim that a sales tax is progressive?

    1. The employees are not being taxed. Just the employers.

      In its previous “head tax” format, employers paying a bunch of short-term part-time employees starvation wages were hit the hardest. In my book, that is a feature, not a bug. (But this does raise the question of whether bringing in contractors would skirt the tax.)

      I’m not sold on the “hours” format, as that could balloon the administrative costs of the tax.

      But if the tax were waived for employees who receive a full transit pass from the employer, that would feed two birds with one seed. Metro would get a bump in ridership, and revenue to help pay for the new buses and service hours to move that ridership. Of course that raises a further question: Why make it a tax, when the City could require employers to pay for transit passes for their employees?

      1. Doesn’t really matter who writes the check for the tax. Just because it is small and paid by employers doesn’t mean that workers don’t bear some of the burden. Companies buy labor. When labor costs more, companies look for ways to substitute labor with capital (i.e. machines). That restaurant dishwasher can be replaced with a dishwashing machine.

        The concept of “tax incidence” in economics determines where the tax burden falls. Cigarette taxes hit tobacco companies and retailers, even though smokers “pay” the tax. High sales taxes affect restaurant workers, owners, and diners each to some extent by discouraging dining out. The same is true for every tax.

      2. You can’t pass taxes along to employees who are already being paid the minimum wage, so your argument assumes increased unemployment/underemployment. I saw nothing of that sort as a result of the previous head tax.

      3. Right, now allow me to prove (by the same logic) that the sales tax is progressive:

        The sales tax is paid for by companies. Individuals do not pay it. Retailers send checks to the state to pay for it, based on the amount of sales they make. The more they sell, the more *they* send to the state. Therefore, the sales tax is progressive.

        I’m sorry, but that is ridiculous.

      4. Ross, companies don’t actually pay the sales tax in Washington. It’s a trust fund liability; that means that customers pay the tax, the business collects it, and holds it in trust until it pays it over to the state. The initially liability is to person buying the taxed item, but the responsibility to collect and pay over belongs to the business. The business only has liability if it fails to pay the tax over to the state.

      5. I’m not surprised you didn’t see any effects. They would be small and hard to see in the “noise” of other economic factors. Again, small taxes aren’t good or economically efficient taxes, they are just small.

        If you think the tax stands on its own merits, not just because it is small, why not argue for a much larger annual levy?

      6. Technically, Jason, no. The tax is charged on the business; they can if they want pass it over to customers. Some places don’t explicitly pass it on and pay it out of the simple purchase price of the item; in North Carolina where I grew up, there’s one weekend a year where a lot of retailers will stop explicitly charging tax on many items for a “sales tax holiday.”

      7. William, I’m an attorney and I deal with this stuff for a living. I’m correct about this. See RCW 82.08.050, which is really damn clear on this point.

      8. I’m surprised; thanks for the correction. It seems the law’s different here than in North Carolina; the RCW is explicit that “Except as otherwise provided in this subsection, the tax required by this chapter to be collected by the seller must be stated separately from the selling price in any sales invoice or other instrument of sale.”

        Which makes me wonder why (say) the Microsoft cafeterias aren’t doing that. Maybe they’re exempt from sales tax because they’re only open to employees and contractors?

      9. At best it is a distinction without a difference, and in no way makes it progressive, by any reasonable meaning of the word. The tax is per employee, not per dollar the employee makes. The former is regressive, the latter could be progressive (if the percentage taxes increases per dollar) regardless of who is technically taxed or how it is collected.

        Like I said, there is nothing in this post that makes the case that this tax is progressive. It simply states it, as if it is obvious, when it isn’t. Quite the opposite. The sales tax in North Carolina is just as regressive as the sales tax in Washington State, and this tax will be just as (if not more) regressive.

    2. Employer-based transit passes sounds like employer-based medical insurance. It’s a good thing but why should we burden employers with it? Perhaps we should take the next step and consider socialized transit passes (discount passes for all) or single-payer passes (free passes for all).

      1. Your suggestion is like those car ads where they say “buy a new Jaguar and we’ll give you $1500 cash back.” Ok…. why not just drop the price by $1500 in the first place? Transit is socialized to begin with, so if they genuinely wanted to make it a more socialized system, then why not just lower fares universally?

        And after a conversation on the facebook group, I’m really confused why people even bother to pay a fare, since there’s effectively no penalty for not paying it. It makes it seem like we’ve already gone to a single-payer system and that any fares paid are just extra money in the bucket.

      2. There’s a city in eastern Europe that started buying transit passes for all its residents. I don’t remember if it was Tallin or Prague or another city, but it was somewhere around there. That’s almost the same as taxes fully paying for transit except that non-residents pay fares. Of course it would be more difficult to do here. We don’t have homeless housing so the homeless would spend all day on the bus, and our suburbs have a different relationship to the city (more inter-municipal commuters). So I’m not saying we should rush out and adopt it now, but it’s worth thinking about as we plan our long-term network.

        The standard objection would be that anything free will be overused, even beyond the homeless, and we would have to pay for the excess infrastructure and operations. But the purpose of transit is to allow people to circulate around the region as they want to, because they can decide better than someone else what their optimal number of trips is. (“You exceeded your visiting-grandma quota this month, young man. Fine $124.”) The city’s commerce, social cohesion, and cultural life are optimal when everyone can easily make their optimal number of trips. There’s a natural ceiling to that, because people don’t want to spend all day riding in circles if they have more interesting things to do. The job of the city/county is to find that ceiling and provide that level of transit, where a reasonable level of ridership exists (i.e., not to every cul-de-sac house). A lack of transit service or excessive fares can impede the goal of optimal circulation. So just as we think about the right amount of transit long-term, we should also think about the right amount of fares (and not necessarily base it on the cost of the service).

    3. Ross, the EHT is levied at the employer level, not against individuals. Truly small businesses already pay no B&O and no city sales tax, and they wouldn’t be required to pay the EHT either. Administrative costs would also be near zero, if the program is set up properly with few exemptions. Simply count your employees, multiply by the tax rate, and pay that amount when you pay your other taxes. There’s really no administrative burden, and I say this as someone who owns and runs a fairly small business in downtown Seattle.

      Here’s an example that will hopefully illustrate why this tax, if done right, is a good idea: Take a smallish business with approximately $1M in revenue per year (most businesses in central Seattle gross far more than this by the way). Depending on the type of business, the number of employees would likely range from approximately 5 (in the case of a service business like a law firm) to maybe 20 (in the case of a hospitality business like a restaurant). Let’s say the tax rate is $50 per employee, with no exemptions. Even for the employee-heavy hospitality business, that’s only $1000 per year. That represents 0.1% of gross revenue. Put another way, even the most employee intensive businesses could cover the cost of $50 per head by raising prices substantially less than 1%. Your $20 dinner might need to cost $20.20 in order to cover this, and that’s at the outside edge. Literally no one is going to close up shop because of a tax this small. No levying a reasonable EHT is leaving transit money on the table for no good reason.

      1. Well, by that logic we’re leaving a lot of money “on the table” because you could nickel and dime every business more. But that doesn’t make it good tax policy.

        Would you be ok with a $5 tax on each chair in your office? It would be small, and easy to collect. Nobody would be going out of business because of that alone.

        I jest, but only slightly. We can come up with a bunch of bizarre, but small and easy to collect, taxes. That doesn’t make them good. Sales tax is also easy to collect – it is already being collected. Same for the gas tax and the property tax. Let’s use those tools, not a patchwork of random taxes.

      2. Alex, I know you’re joking, but office chairs are already taxed both at the point of sale and by the county personal property tax levy each year. It wouldn’t make any sense to tax them again since the number of chairs bears no relationship to impacts on our transportation system.

        And most businesses don’t directly pay any gas tax. The business tax climate in Washington in ridiculously conservative and the tax burden is very, very low. Given our inability to levy personal income taxes, we need to pay for necessary maintenance and improvements somehow. A patchwork of relatively small taxes is really the only way forward.

      3. Actually, now that I think about it, workers sit in those chairs (surely you don’t buy 100s of chairs for decoration) and they have to get to work somehow. Makes more sense than taxing filing cabinets, at least, not that I endorse such a plan.

        Property tax is relatively progressive since it hits wealthy landowners much higher than low-income renters (as landlords usually can’t pass on 100% of the property tax). It is also a lot bigger than you think compared to sales tax. To pay $5000 in sales tax I’d have to buy more than $50,000 worth of taxable stuff. No way I even get close to that. However, I’d pay $5000 in property tax if I owned even a modest home in Seattle.

        Many businesses pay a lot of gas tax. UPS must pay a small fortune. Plumbers can’t teleport to your leaky pipe – they have to drive. I even pay some gas tax when I rent a car on business.

      4. You missed the point. Three times the author of this piece used the word “progressive”. three times! What did she mean by that, if not that this was a “progressive tax”? But it isn’t, by the common definition of a progressive tax, as understood by most people (and described quite well in Wikipedia). I linked to it, but somehow you ignored that. Here, let me copy the first sentence:

        A progressive tax is a tax in which the tax rate increases as the taxable amount increases

        The tax rate doesn’t increase as the taxable amount increases. I don’t know how much simpler to make this — the tax isn’t progressive. Far from it. If you consider the “taxable amount” to be an employee, then the tax is at best flat. If you consider the “taxable amount” to be income, it is regressive. Damn regressive. It is probably one of the more regressive taxes there are. It is probably more regressive than a sales tax, since at least a sales tax is not applied to certain items (e. g. food) and is not based on the individual, but the amount they spend. If I spend a hundred grand on furniture this year, I’ll pay a lot of sales tax. If you spend fifty bucks, you’ll spend a little. But either way we would both be taxed the same amount (just a little).

      5. I wouldn’t target businesses per se. I don’t see why businesses are more “deserving” of taxes than people.

        My preferred funding mechanism would be a higher gas tax to fully fund local road maintenance. This would have to come from the state, but the state actually did manage to raise the gas tax this session so it is possible. Then use the local property tax revenues that were funding local road maintenance to fund transit and other investments (sidewalks, etc.).

        No random new taxes to collect. Simple and easy to understand. Users of roads should pay more for them. Big SUV drivers pay a lot more.

      6. Also,

        Truly small businesses already pay no B&O and no city sales tax, and they wouldn’t be required to pay the EHT either

        That definition of small business is ridiculous, and I suggest you talk to one. Go ahead, talk to the local restaurant or pub that has yet to pay back their creditors and ask them about the B & O tax. They pay it, even if they have as many employees (2) as owners (2). Income tax may be low (as low as zero) but B and O tax is usually substantial, especially if they are a business (like a brewpub) that spends a lot (but only nets a little).

      7. Ross, I’ve represented dozens and dozens of small businesses, including handling disputes with WADOR, L&I, and the IRS. And including more than one brewery, multiple pubs, and countless restaurants. I have only once seen a problem with unpaid B&O. Sales tax, yes. 6672 liability, yes. 941 taxes, yes. Unpaid L&I, yes. But not B&O.

        What’s your experience? And which category of B&O is so problematic?

  9. I don’t understand this tax mechanism at all. It seems like someone just said, “employee hours are a measurable value, let’s write up a formula for taxing it.” Linkage fees, I can understand — you pay a tax because you benefit from the infrastructure around the area. Property taxes, I can understand, too. But this one just doesn’t make any sense. If the basis of the tax is to tax congestion that employees cause, then *even if* every single employee bussed, walked, or took the train into work, they’d still be taxed for it. This kind of a tax doesn’t get at the problem, it’s just another way to nickel and dime businesses.

    What’s more, I honestly don’t think that more money in the coffers will accelerate growth of transit. Even with all the money needed to get the job done, Link expansion has been painfully slow. BRT is moving just as slowly because we’re wasting years doing impact studies and arguing about whether an alignment through x is better than an alignment through y. And even if we did expand BRT service, it would still be this half-assed BRT that is only BRT because we call it that.

    1. Linkage fees aren’t about benefiting from the existing infrastructure. They’re about increasing the infrastructure to meet the demand of the additional residents.

      The problem is that it treats the new people in that building as the sole problem. But population increase is a citywide issue: people have kids, they need jobs that new companies bring, and there’s currently a shortage of housing. So the entire city should pay for the solution, not just soak the people in the new building. Because some of the people in the new building are existing residents who’ve moved out of their parents’ house, gotten divorced, changed jobs, etc. And some of the people priced out of the building are existing residents. It’s not as simple as “Amazon creates jobs; tekkies invade the city; it’s all the developers’ fault.”

      1. You assume that a one-time 5% impact fee, capitalized over the life of the mortgage, would raise rents perceptibly. Instead, rents are set by the developers at the high end of what the market will bear. And, yes, the market is being set by the thousands of techies moving in. None of the people are “priced out of the building.” People in service-sector jobs making $11 – $22/ hr. can only afford to pay $500 to $1,000 a month. We must pay for subsidized housing for those making less than a living wage. The GMA set one-time impact fees to pay for concurrent infrastructure and only Seattle, among 80 cities, has declined to charge them. Isn’t it clear that our infrastructure is overwhelmed? Blame the developers, who pay impact fees elsewhere and block them in Seattle.

  10. The Employee Hours Tax is a flexible tool, since it arises from Seattle’s general business license authority (RCW 35.22.280 (32)). There is no cap, and nor is there any requirement that the EHT be uniform for all businesses. So as long as there are sound policy reasons for it, per-employee rates could vary by geographic area or even type of business.

    Is it flexible enough to move it from a per head tax to a payroll tax?

    Can you imagine what just a .5% payroll tax would generate? Be progressive as well.

  11. Outside of this blog, a large majority of people in Seattle are against more density in their neighborhoods and additional taxes for SDOT, ST, and Metro. Just the facts.

    1. Which city voted for Prop 1 and ST2? Which city’s primary election winners had surprisingly many friends of density? (Especially north and northwest Seattle, which we assumed would be anti-density strongholds.)

  12. Thank you everyone for the comments, I really appreciate the overall quality of discussion on STB. I wanted to respond to a few points, in no particular order:

    @Matthew Johnson: “Is it flexible enough to move it from a per head tax to a payroll tax?” That’s an excellent question. Up until this spring I assumed the city had some specific authority for the EHT, like King County and Sound Transit do for the (unused) Employer Tax, and I figured it was similarly constrained. So while TRU has been interested for a while now in the idea of a transit tax based on gross payroll, as exists in Portland and NYC (paid by employers, not as a payroll deduction), we thought that would require new state authority & we even got it into a bill (HB 2563). But if Seattle can already do it, that’s great. After reading your comment I emailed some of our city hall contacts to get the question put to central staff, but it seems they’re all on recess till early September (lazy bastards! Just kidding). Anyway, we’ll find out.

    @Brent White re parking: Do you know for sure whether parking garages like the ones Amazon is building are covered by the Commercial Parking Tax? Looking at the SMC I think they probably are (even if employees ostensibly park for free) but there are a few exemptions they might be able to take advantage of. It would be worth finding out. Parking spaces that definitely don’t pay CPT include “free” lots at Northgate Mall, Home Depot, etc. It absolutely makes sense to supplement or replace the CPT with a Non-Residential Parking Tax (NRPT) that would cover these lots, paid by the landowner and/or business owner. (I favor supplementing, with a credit for the CPT, because I think this makes it more likely that the result of the political wrangling will be a net increase in revenue.) This would effectively close a huge loophole, encourage better land use, reduce stormwater runoff… TRU worked with Brady Walkinshaw’s office to get a bill going last year (HB 2168) for this local option & we’re hoping to get some traction next session.

    @Brent White re transit passes: One could argue that the original EHT was an incentive for employers to provide passes, since it didn’t tally transit commuters. However, the tax was so low compared to the the cost of passes ($18 v. $500 or more for an ORCA Business Passport) that it wasn’t an effective incentive. So unless Seattle passes a rather enormous EHT I don’t think it makes sense to include this exemption, and even then I’m not sure it’s a good idea. The businesses that would be let off the hook because they already provide passes (for reasons having to do with their business model & the class of workers they are trying to attract, rather than getting a tax break) would be precisely those, like Amazon, that really should be contributing. As stated above, I think a better way to get more employers providing (or at least partially subsidizing) transit passes is simply to require it by strengthening Seattle’s Commute Trip Reduction Plan. As you said, “Why make it a tax, when the City could require employers to pay for transit passes for their employees?” – of course one would need to be sensitive to the burden on smaller businesses here too.

    @Mike Orr: “Employer-based transit passes sounds like employer-based medical insurance. It’s a good thing but why should we burden employers with it? Perhaps we should take the next step and consider socialized transit passes (discount passes for all) or single-payer passes (free passes for all).” I’m all for it! Tallinn, Estonia is the city you’re thinking of.

    @Scotth: The Licata-Sawant proposal was designed to make the EHT much easier and less costly to administer than it proved the first time round. To read about their proposed definition of small business and exemptions, look up Council Bill 118138.

    @RossB: With regressive v. progressive taxation such a hot issue right now, and so much confusion as well as legitimate controversy as to what the terms mean, what taxes qualify as regressive or progressive and why, and how much this matters, I think there needs to be more in-depth discussion than has happened so far. This could begin with a thorough article – I’d love to write this if I can find the time. But for now I’ll just highlight one distinction that was alluded to in the comments. When people say that sales tax, for example, is regressive, they are saying this on the grounds that people in lower income brackets on average pay a larger percentage of their income in sales tax than people in higher income brackets. Even though everyone pays the same rate on the things they buy, poor people spend more of their money on taxable goods. To give another example, social security and medicare payroll taxes would be flat (6.2% and 1.45% for everyone) but for the $118,000 cap which ends up making them very regressive indeed. And the federal income tax is progressive because people with higher incomes pay a higher percentage. So, how a tax affects people in different income brackets is one consideration, but I actually don’t think it’s the most important one. Have you seen those graphs showing how since around 1970 wages have stagnated while productivity has continued to grow? That’s a shift in wealth from labor to capital. So the other question is how a tax falls on workers (in whatever income bracket) as opposed to on capital. Of course when you get into details it gets complicated: because many workers are also directly or indirectly owners of capital that can be taxed (houses, pensions, stocks), because some taxes that are formally levied on one entity are partly or fully passed on in various ways to other people or entities, etc. I think property tax is a particularly complex case, partly because there’s a lot of debate as to how or whether it gets passed on to renters, and partly because a house generally plays a different role in people’s lives than more fungible assets. Anyway, in the case of the EHT, as some commenters pointed out it will not come out of workers’ paychecks. It’s paid by capital, it’s unlikely to be passed on to individuals in any direct way at all, and by that measure it’s a progressive tax. And yes, it would be even more progressive (bigger capital pays more) if it were based on gross payroll rather than hours.

    @Zack L: So glad you noticed the posters. TRU has been advocating for an Employee Hours Tax far longer than we’ve been “shilling” for Grant and Sawant. It is true that election season tends to be a good time to push councilmembers to act on their words.

    1. A one-time impact fee for infrastructure or a linkage fee for affordable housing are paid by capital, as part of the financing. They are not annual taxes, which are passed directly through to tenants in NNN calculations. Everyone voting on property tax levies should be mindful of this distinction.

  13. He extolled tech giants like HP and Apple for the “passion” of their workers, and told old-industry employers that they could move into the new age by seeking out and rewarding that kind of passion in their employees, too. Though Peters didn t advocate this explicitly, it was implicitly understood that to passionate people, 40-hour weeks were old-fashioned and boring.

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