02-18-2020 HB 2907Legislative Update
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Council Discussion and Possible Action Regarding a Position
on House Bill 2907
Which Would Authorize
an Excise Tax on Businesses in King County
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House Bill 2907 and Senate Bill 6669
would allow counties
over two million in population
to impose an excise tax on businesses
for homelessness services
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The bill would authorize King County to:
Collect an annual excise tax on business payroll expenses of not less than 1/10% and not more than 2/10th%
The tax applies to all payroll expenses attributable to employees making more than S150k in annually.
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The bill would authorize King County to:
The tax may be imposed for 25- years and may be reauthorized by the county.
Increases annually based on the CPI-U
The City of Seattle estimates the tax would raise approximately $120 million per year (the origin of the estimate is not clear)
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Exemptions to the tax include:
Small businesses with fewer than 50 employees, provided the business pays annual compensation of less than S150k to at least half of its employees
Payroll expenses attributable to grocery workers
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Exemptions to the tax include:
Businesses that only sell, manufacture, or distribute motor vehicle fuel
Businesses that only sell, manufacture, or distribute liquor
Cancer centers
Government entities
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Distribution of funds:
43% of all revenue is provided to the city with the highest homeless population (Seattle).
The remaining 57% is distributed by the county with cities and regional housing partnerships.
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Eligible expenses:
Supportive services to persons with behavioral health conditions with frequent criminal justice involvement (no more than 10%)
Low income rental assistance.
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Eligible expenses:
Housing, shelter, and evidence-based interventions to address and prevent homelessness.
Any appropriated funds must be allocated directly to the regional homelessness authority.
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Eligible expenses:
Acquisition, construction, or operation of behavioral health related facilities
The revenue collected may be used for repayment of bonds
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Eligible Expenses:
At least half of all funds appropriated must go toward acquisition, rehab, or construction of affordable housing.
The remaining funds may be spent on other eligible expenses outlined in the bill.
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Eligible Expenses:
Housing, services, and rental assistance may only be provided to persons whose income is at or below 80% of median income.
Half of that spending going toward
persons whose income is at or below 30% of median income.
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Amendment from House Finance Comm:
Require representatives from cities and state elected officials from each subregion of the county be included on an accountability and advisory committee
Ongoing negotiations that would address some of the issues raised in the amendments that were not adopted.
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Concerns:
Essentially a Business & Occupation tax, this would practically preclude cities without one to have this revenue tool in the future including Federal Way
There was no notice or collaboration with Cities, businesses & the County Council
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Concerns:
There is no proposed "plan." Money would be allocated to the newly formed "King County Public Development Authority" which has not met
Some businesses that signed on thought it was to "begin a discussion“ with the business, the community and cities.
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Concerns:
Some public officials that signed on thought it was to "begin a dialogue.“
As far as we can tell at this time, the vast majority of Sound Cities Association Cities oppose this tax. The Public lssues Committee discussed this for the first time last week.
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Concerns:
43% of the money taken from the South County would fund Seattle homelessness projects and the other 57% in King County. That is 20 million dollars that will be taken from the South
County to solve a Seattle issue
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Concerns:
There are approximately 74-90 businesses in Federal Way that have 50 or more employees.
Businesses with under 50 employees are eligible if half or more of the employees make $150,000 or more. For example, small law, investment and start-ups, etc.
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Concerns:
Businesses may relocate across the border to Pierce County to avoid the tax.
Some of these businesses avoided locating or left Seattle for the same reasons.
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Concerns:
This would cause further tax fatigue for the South County.
This is taxation without consultation, implementation and representation.
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Also under consideration:
House Bill 1590
An act relating to allowing the local sales and use tax for affordable housing to be
imposed by a councilmanic authority.
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On-Going Outreach:
Legislative delegation
Sound Cities Association
Business groups
Greater Federal Way Chamber
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Discussion
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