This topic has come up at some of the candidate forums we’ve attended – the unpopularity of the so-called “head tax,” formally known as the “employee hours tax,” requiring Seattle employers to pay a $25 annual tax for each employee. Now, there’s word of a formal proposal to repeal it – read on for the city news release:
Mayor Greg Nickels and Councilmembers Richard Conlin and Tim
Burgess announced today a proposal to encourage job growth by repealing
a tax paid by Seattle businesses.
The annual tax of $25 per employee, known as the “employee hours
tax,” was imposed in 2006 as part of a package to provide additional
funding for transportation projects. The repeal would be effective Jan.
“In these tough economic times, we want to do everything possible to
create jobs and help businesses grow. I want to thank Councilmembers
Burgess and Conlin for their leadership in repealing this tax,” said
Nickels. “By taking this action, we will both improve our business
climate and still meet our commitment to fixing roads.”
“We have worked closely with the mayor over the past few months to
identify obstacles to economic growth and we agree that repeal of this
tax will encourage job growth,” Burgess said. “The employee hours
tax has generated less revenue than anticipated, but more importantly it
has negative consequences because it taxes the creation of new jobs.”
The employee hours tax was originally proposed during a strong economy
as a revenue source tied to employees who drive to work alone. There
were multiple exemptions for workers who commute by mass transit,
carpool, bicycle or walking. It was part of the “Bridging the Gap”
transportation improvement plan.
“It’s Economics 101: when you tax something, you get less of it,
and we want more jobs in Seattle,” said Council President Conlin.
“We asked the business community what would help them get back on
their feet, and this was one of their first suggestions. That’s why my
Committee of the Whole on Economic Recovery decided to address this
issue. We’re removing a barrier to getting people back to work.”
If approved by Council, the repeal of the employee hours tax would
reduce revenue for some transportation projects, such as streets and
sidewalks, by approximately $4.7 million next year. No specific projects
had been identified for these funds. In addition to property taxes, the
“Bridging the Gap” program also receives revenue from commercial
parking taxes, which are raising more funds than anticipated. Even
without the employee hours tax revenues, the budget for “Bridging the
Gap” remains about $60 million in 2010.