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Lawmakers continue to make headway on King County big business tax

People fill a hallway during Seattle's heated 2018 head tax debate. (AP Photo/Elaine Thompson)

A state-level proposal to levy a tax on big businesses in King County is still alive after a key legislative deadline passed this week.

Seattle council clashes over how to address state head tax proposal

The state Legislature’s short 2020 session ended at 5 p.m. Wednesday, as the clock expired for a handful of failed bills. Despite ultimately not getting passed by the House and Senate, the big business tax proposal was revived in the form of a replacement bill Thursday. That keeps it alive while lawmakers continue to negotiate its terms.

The bill is sponsored by Rep. Nicole Macri, a Democrat who represents the Seattle area, and fellow Democrat Rep. Larry Springer of Kirkland. . It would impose a tax on large businesses with employees making at least $150,000 a year, in counties with a population over 2 million. That would limit it solely to King County.

Businesses like Amazon, Microsoft, and Expedia have thrown their tacit support behind the bill, although many theorize that their support is conditional on a ban on all future big business taxes in Washington state.

“Negotiations have been ongoing for close to two weeks, they were making significant progress, hadn’t solved all of the problems but several of them had been addressed so we were inching closer to an agreement [and] we ran out of time,” Springer said.

So that bill, HB 2907, died at Wednesday cut-off and Democrats crafted the new bill to buy more time. The new version included several of agreed-upon issues lawmakers resolved in the past couple of weeks.

The replacement bill tasks the state Employment Security Department with tasked with confirming a company’s gross receipts, number of employees and how much they earn to determine the tax. The state auditor will also have to report on the tax. Both have budget implications for the state so the bill won’t be subjected to any cut off deadlines and they have until the end of session to pass it.

Springer says talks have led to agreement in several areas so far, including allocation of the tax revenue – who gets how much — what the money can’t be used for and who administers the tax.

“Where there is not agreement yet is how many businesses are in – what’s the criteria for inclusion? What’s the amount – the tax rate and is there preemption,” Springer said.

Preemption would ban cities from enacting their own separate business tax in the future, blocking proposals like Seattle City Councilmember Kshama Sawant’s Amazon tax.

“It’s a very sticky topic,” Springer noted. “Of course the business community says that if we’re going to pay this large tax bite we don’t want cities piling on afterwards with additional taxes. Cities say ‘we want to retain the ability to raise our own taxes if we want to,’ so that’s the run right now that we’re trying to work out.”

The new bill – at least in its current form — also increases the originally-proposed tax rate from a range of 0.1% to 0.2% to 0.25%. That could raise more money to invest in housing and homeless services than the original, especially with bonding – but the rate is not set in stone at this point.

Small businesses would be exempt from the tax, but there are lingering questions about what qualifies as a small business.

“Right now, the threshold is more than 50 employees and gross receipts of$3 million or more,” Springer explained. “So if you have a company with 80 employees, but you don’t gross $3 million you’re out. If you are company that grosses $3 million or more and you have fewer than 50 employees, and more than half of them make the $150,000, then you’re in. So, it’s a complicated formula.”

He says that just shows that all of these areas could still be tweaked as negotiations continue, and that things should become clearer after the bill gets a hearing next week.

Even if they find agreement, though, it’s a very tight timeline.

“We’ll have a hearing next Thursday — the quickest we could then probably get out of committee would be the following Monday, and then if all goes well and I can actually get the votes for it in my caucus — which I don’t know if I can yet we haven’t had much discussion yet. We could get it out of caucus maybe on that following Wednesday, and over to the Senate, and it gives them a week-and-a-half,” Springer said.

A companion bill is also expected to drop soon, making it so both chambers are working the proposal at the same time.

Springer says the biggest sticking point to getting this across the finish line is preemption. While it is not in the new bill right now, it is likely to resurface in the discussion.

As for the chances this proposal goes all the way:

“I’d say we’re on the 50 yard line,” Springrer said.

Despite the lack of preemption in the bill’s current form, the replacement version also does mention a stated goal of “ensuring certainty and predictability for business.”

Sawant: Amazon support of tax is ‘bottom line political calculus’

Rep. Macri has also intimated to Seattle City Council that “any and all provisions of this legislation are up for conversation.”

Meanwhile, Seattle councilmembers have stated that while they largely support Macri’s bill, they also oppose the potential inclusion of any ban on future business taxes.

“The city of Seattle has deep concerns with a preemption,” Councilmember Teresa Mosqueda said in early February. “Much like state legislative members, we here in the city have also been elected to serve our constituents, and in order to do so, we need every tool in our toolkit.”

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