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With limited options to generate revenue, Seattle City Councilmember says head tax was best option

The Seattle City Council voted to repeal its controversial head tax by a 7-2 vote on Tuesday afternoon. Prior to taking the vote, councilmembers discussed their rationale for voting for or against the repeal, including polling results and the business backers of the referendum to repeal.

Despite opponents’ claims that the city could address homelessness with better money management rather than collecting new funds, all councilmembers who spoke agreed that additional and new revenue is needed to solve the problem.

They also commented on Seattle’s regressive tax structure and their limited ability to generate new revenue that doesn’t negatively impact property owners and consumers. They claimed that the head tax is one of their few progressive options.

In Washington State, municipalities are granted taxing authority exclusively through legislative approval and the Constitution. Currently, the city council can collect sales taxes and uniform property taxes – both of which tend to disproportionately impact lower income communities. Municipalities in the state do not, however, have the authority to create a local income tax or a graduated, progressive property tax.

Because of these limitations, Councilmember Mike O’Brien, who ultimately voted to repeal the tax, called the head tax their best option.

“From my policy analysis, this is the best tool that we have,” said O’Brien. “We don’t have a lot of great revenue options at the city and the employee hours tax is the one that makes the most sense. It’s not a perfect tax, but it’s the most fair.”

Councilmember Lorena Gonzalez also discussed the council’s constricted ability to generate new funds, saying,

“There are limited options that we have available to us as a city in terms of generating new revenue that don’t require us to further burden homeowners and consumers, and that’s why we chose this particular policy.”

An employee hours tax is one of several options recommended by the city council’s Progressive Revenue Task Force as a way to avoid regressive options. Other recommended possibilities include a local progressive estate tax, taxes on “exceptionally high earners,” raising the Real Estate Transfer Tax, and considering ways to tax second homes or vacant/unoccupied properties.

Councilmember Teresa Mosqueda says the city council is continuing to work with different cities and advocates to give municipalities more revenue-generating options.

“We are continuing to work with our Office of Intergovernmental Relations, community advocates and municipalities across the state to encourage the state legislature to free up prohibitions on local governments,” says Mosqueda. “Additionally, we must be thinking outside of the box about how to better utilize under-utilized land to build housing and emergency shelter ideas, and I’ll be looking at bonding avenues for City and County funds where possible.”

While the city council is searching for ways to expand their revenue generating capabilities, Senator Mark Schoesler recently proposed legislation that would further limit local government’s ability to generate revenue by banning all cities and counties from enacting employee hours taxes.