The group supporting Seattle’s social housing developer, voted into existence in 2023, filed an initiative Tuesday to enact a payroll tax on businesses in the city with employees making over $1 million. If successful, the tax could raise as much as $50 million a year to go toward the acquisition and construction of affordable housing.
The filing kicks off an effort to gather around 30,000 signatures from Seattle voters by June, with the hope of getting the measure on the ballot this November.
If it makes the ballot and is approved, the initiative would enact a 5% marginal payroll tax on salaries above $1 million. So if a company had an employee making $2 million, it would pay the tax on $1 million of that salary.
With the revenue source, social housing developer leaders estimates they could acquire or build 2,000 affordable units over 10 years.
“If we’re honest with ourselves, and if lawmakers were honest with us, there is no level of government that has a plan to address our housing crisis at scale,” said Tiffani McCoy, policy and advocacy director with the House Our Neighbors campaign, which is supporting the startup of the social housing agency.
The social housing developer was approved by voters by a comfortable margin in 2023. The pitch was that, while Seattle has paths for funding and building highly subsidized housing for its poorest residents, there are few avenues for funding affordable housing for lower-middle and working class households. In particular, the city lacks housing for families in need of three or more bedrooms.
The social housing developer will therefore focus its efforts on housing affordable to people earning up to 120% of the area’s median income, which last year was nearly $90,000 for a single person and $125,000 for a family of four. Unlike some affordable housing, these units will stay affordable in perpetuity.
“The harsh reality that I face as a developer is that without high rents, or very small apartments, we can’t satisfy the demands of our private-sector investors,” said Ben Maritz, an affordable housing developer. “This leaves countless families without affordable options.”
One question raised by skeptics of the new housing developer was how it would fund its ambitions and whether it would compete for already thin dollars to build housing. The 2023 ballot measure did not include a funding source, which its backers said was to avoid running afoul of the state’s rules against having multiple subjects in one initiative. The city and state have both chipped in for initial administrative costs, but neither has agreed to support the development effort long term.
Seattle already has one payroll tax on large businesses, dubbed JumpStart by its supporters. Enacted in 2020, that tax has raised between $200 million and $300 million a year to fund highly subsidized housing.
The business world in Seattle fought that tax, taking it to court when its lobbying efforts failed. But it was upheld and, for now, the tax has been allowed to live.
But while that community has mostly reached a détente with the JumpStart tax, it’s unlikely to agree to additional taxes on business.
Rachel Smith, CEO of the Seattle Metropolitan Chamber of Commerce, criticized the proposal Tuesday.
“Increasing the payroll expense tax for a third time in four years, expanding the tax to impact more than the 500 Seattle companies that already pay, and doing so with zero outreach to those impacted businesses is not the right approach,” she said.
The new City Council has taken a much more skeptical view of new and existing tax revenue and the ballot measure is an acknowledgment that the council’s members are not likely to agree to additional payroll taxes.
“I’ll be happy to be proven wrong,” said McCoy.
It’s unclear how many businesses would be affected by the tax. The campaign came to its estimates by using publicly available databases from past state and city legislative efforts.
Unlike the JumpStart tax, this new payroll tax would not exempt grocery stores or health care companies. When the City Council proposed a similar “head tax” in 2017, it was brought down, in part, by opposition from grocery stores.
McCoy countered, “If you’re able to pay someone on your payroll over a million dollars a year, I think that you can afford a 5% tax to go to our social housing that stays in the public hands forever.”
The measure would share a crowded November ballot as initiative boosters seek to take advantage of the high turnout of a presidential election. Also on that ballot will be a slate of more conservative initiatives, including one that would repeal the state’s ability to enact a tax on capital gains.