Proposed House bill would be bad for business

Measure could prompt exodus from Auburn

Claude DeCorsi

Claude DeCorsi

It began to take shape when a number of the state’s largest businesses, most of them in King County, got together to talk about a possible assessment on businesses to help with homelessness and affordable housing.

Good intentions, good start, Auburn Mayor Nancy Backus told the Auburn City Council on Tuesday night.

But when she got to what’s come out of those discussions, House Bill 2907, which proposes a one-tenth to two-tenths of a percent payroll tax on employers in King County with salaries of $150,000 plus, and possibly on bonuses, stock options and other items, she got a thumbs down.

Not for helping out with the homeless, but for the process that has shaped the bill into what it is today.

There were concerns about undue influence from the bill’s Eastside sponsors in the House, with ramifications for the rest of the 39 cities about how the estimated $121 million to be raised will be distributed and spent. That is, 47 percent to the city of Seattle, and 57 percent to the rest, with 50 percent of the latter to be dedicated to affordable housing and only 10 percent to behavioral health.

“It was intended to be a regional approach to homelessness and affordable housing,” Backus began, “but, unfortunately before the bill dropped, there was no outreach to neighboring cities.”

And, of major concern for Auburn’s leaders, this: that if HB 2907 passes in its current form, the city of Auburn, which straddles King and Pierce counties, could see an exodus of businesses to Pierce, where there would be no such payroll tax.

Backus said the city has tried to determine how many Auburn businesses would be subject to the payroll tax but that information was confidential.

When the bill was first presented to freshman members of the House, Backus said, they were told it was “only a discussion starter.”

“Much to our concern, it has moved along quickly through the House Finance Committee, with one amendment by the 33rd District representative, who was supportive of assuring that South King County would be taken care of, that subregional partners be involved in discussions of how the money is allocated,” Backus said.

Another concern: what employers would be affected, and who would be exempt from the payroll tax?

State law defines “employee” to include individuals who are members of a limited liability company, members of professional LLCs, partners, and sole proprietors.

“That would include almost every employer within our communities,” Backus said. “The exemption (from the payroll tax) would occur if you are a small business – defined currently as 50 or fewer employees – if less than half of your employees made over the $150,000 threshold. But if you are a partnership, and both of you in that partnership make in excess of $150,00, you would be subject to this payroll tax.

“This almost reminds me of a regressive tax,” said Councilman Claude DaCorsi. “We’re looking at increasing business opportunities in Auburn and elsewhere. … There are opportunities for businesses to go elsewhere, and they may choose to do that.

“They’re looking at today’s market, and it’s highly competitive, at how they are going to stay alive, or make ends meet. They are going to make the best decisions possible, and in many cases the best decisions are where I get the best tax breaks and grow my business from that standpoint,” DaCorsi added.

“My general feeling is that our tax structure in Washington is probably the most regressive in the entire country,” said Councilman Chris Stearns.

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