‘Head tax’ is small sacrifice with big benefits
Wednesday, July 15th, 2009
Times are tough in Seattle for small and large businesses. Everyone is trying to find ways to save money and weather the biggest recession in almost 30 years, and maybe since the end of World War II.
So it makes sense that the Seattle City Council would consider repealing a rather small tax on local businesses as a way of acknowledging this. Repealing the employee hours tax has been proposed by a couple of council members as a symbolic gesture to businesses.
But let’s take a quick look at the employee hours tax, often called the “head tax.” It is $25 per employee and it doesn’t have to be paid for employees that don’t drive to work. Most employers admit that they don’t pay much tax, and businesses that have less than $80,000 in revenue are exempt. They do feel like it is a hassle. Too much paper work can be expensive in terms of time. But the form is only a couple of pages.
We do know that this arguably innocuous tax generates $4.5 million for transportation projects. And this funding is part of the overall Bridging the Gap levy that was passed by Seattle voters to make small but critical infrastructure improvements to Seattle’s sidewalks and roads.
So we know that this symbolic gesture:
• will not create any new jobs or revenue for businesses;
• will eliminate $4 million dollars that currently pay for projects that employ people in the city; and
• will eliminate an incentive for employers to encourage their employees NOT to drive to work.
Now, supporters of the repeal acknowledge the first two of these items but deny the last point. Nobody has quit driving to work because of this tax. Do we have survey data? Have collections gone down or up over since the tax was implemented? We really don’t know.
I find local, state and federal taxes annoying and confusing. But that isn’t a rationale to repeal them. Would simplifying the collection of the tax help? We don’t know that, either.
Are there other ideas out there that would create tangible benefits for business other than repealing the tax? Another thing that hasn’t been explored yet.
That is why tax supporters (including myself as a resident of Capitol Hill) are asking for more time to so the City Council can consider these questions. And here are some basic principles the council should consider during discussions this fall. Any repeal or alternative should:
• measurably improve the climate for business in Seattle;
• replace the revenue generated by the employee hours tax;
• create measurable targets for investment in transportation infrastructure and jobs; and
• have an incentive element to discourage driving and encourage alternatives.
If the council waits for the time to consider these principles perhaps there is a chance of finding a win-win solution to the question of how to improve the business climate without hurting neighborhood transportation projects.
