SEATTLE NEWS ARCHIVES & FEATURES
Startups, not Amazon, will be the real losers in Seattle’s business tax
Apr 26, 2018, 6:39 PM | Updated: 10:23 pm
(MyNorthwest)
(MyNorthwest)
The Seattle City Council’s proposed head tax has garnered national attention as one of the most radical business taxes in the nation.
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Nicole Kaeding, director of special projects for national tax policy nonprofit the Tax Foundation, told KIRO Radio’s Dori Monson that the potential tax would “definitely be the largest head tax that [she] is aware of” in the nation.
“I think this is a concerning proposal, and hopefully the city council will decide not to implement it,” she said.
The business tax, which was proposed as a method to fight homelessness, will apply to the 500 or so businesses that gross $20 million or more per year. It will charge the companies 26 cents per employee per hour, or about $540 per employee per year, to raise a total of $75 million annually.
Kaeding explained that Pennsylvania and, until recently, Chicago, also implemented head taxes, but these rates were approximately a tenth the size of Seattle’s. Pennsylvania charges $52 per employee per year, she said, and Chicago, before it repealed its tax, charged $48 per employee per year.
Kaeding added that in the economic downturn of 2009, Seattle repealed a $25 per employee per year business tax because of its potential to kill jobs.
“This is an immense tax burden on every single employee these businesses hire,” she said.
Seattle has become one of the country’s fastest-growing centers of technology, but a business tax could drastically change this boom, Kaeding said. Every single business will feel the head tax.
“Much of the revitalization over the last couple of decades has been because of the emergence of the strong tech sector … But all you’re going to do is encourage them to relocate in other places in the country,” she said.
It is startups who will be hurt the most, she said. Tech businesses can take many years to become profitable, but a business tax will stop them before they can even get going.
“Twenty million dollars seems like a lot of money, but those are still fairly small businesses,” Kaeding said. “What you’re really doing is putting a large impediment to startups in Seattle … this is just one more impediment that the city council would be throwing up in front of them.”
