Here are answers to common questions about Kshama Sawant and Nick Licata’s proposal to fund Metro transit with a progressive tax on businesses. For more information, check out this opinion column by Kshama and Nick in the Puget Sound Business Journal, and see below on how you can support this proposal.

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What is the current proposal being considered by the Transportation Benefit District (TBD) to save Metro?

City Councilmembers, as the Transportation Benefit District board, are currently considering putting a measure on the ballot to save Metro services in Seattle. The proposal from the Mayor is essentially a Seattle-specific version of King County Proposition 1, which failed county-wide in April but was voted for by a majority of Seattle voters.

Like King County Prop 1, the TBD ballot measure, if passed by voters in November, will help avert cuts to Metro by raising $24 million through a vehicle license fee and $21 million through a 0.1% increase in sales tax. The vehicle licensing fee and the increase in the sales tax would be put to voters on the November ballot.

Both the vehicle license fee and the sales tax increase are regressive ways of raising revenue – meaning they hit lower-income and middle-income households the hardest.

What is Kshama and Nick’s proposal? How is it different than the TBD proposal?

The Sawant-Licata plan amends the proposed TBD measure by replacing the regressive sales tax increase with a reinstated Employee Hours Tax on businesses, and by increasing the tax paid by commercial parking lot operators from 12.5 percent to 17.5 percent. The revenue generated from these sources together would be $21 million, the same as would be raised by the 0.1% sales tax increase.

The Employee Hours Tax would be a very modest tax of $16.68 per employee per year, with small businesses exempted. It is estimated that $8 million can be raised from this tax. The remaining $13 million will be raised through an increase in the Commercial Parking Tax, paid by parking lot operators, from 12.5% to 17.5%.

If Councilmembers approve the Sawant-Licata plan, then only the vehicle licensing fee would be put on the ballot. There would be no increase in the sales tax, and the Employee Hours Tax and Commercial Parking Tax would be passed by the City Council.

What is the difference between regressive and progressive revenue measures?

With a regressive tax, households with lower incomes and small businesses pay a greater share of their income in taxes than do wealthier households and corporations.

In the absence of any immediate progressive revenue options at the county level, Kshama had critically supported King County Prop 1. However, we have a progressive alternative at the city level. The Sawant-Licata proposal is a progressive alternative to the TBD measure.

A progressive revenue measure would put greater responsibility on corporations and on wealthier households as opposed to on lower-income people. Progressive measures are better both because they are more fair and just, but also because they are a more reliable source of revenue to fund mass transit, social services, and other societal needs.

Sales tax has proven to be an unstable revenue source because recessions, like the massive one we have just gone through, have a direct negative impact on spending ability. In 2009, Metro lost more than 15 percent of its sales tax base due to the recession. And earlier in 2001, the dot-com crash reduced sales tax revenue and forced Metro to scale back plans to increase service.

Washington State already has the most regressive tax system in the entire nation. A family of four with an annual income of $20,000 pays 16.9% of income in taxes, whereas the wealthiest households pay just 2.8%. And after accounting for the massive corporate welfare in Washington State, big corporations like Boeing, Microsoft, and Amazon effectively pay a negative tax rate.

In addition to saving Metro the progressive way, we need to fight for a Millionaire Tax to fully fund mass transit and public education, and to put an end to the corporate subsidies in Washington State.

How will businesses be affected by the Employee Hours Tax? Is there any truth to the claim by corporations that the Employee Hours Tax will penalize businesses or otherwise negatively impact job creation?

Only businesses that make more than $100,000 a year in taxable revenue would pay the Employee Hours Tax. In other words, the smallest businesses, those that are already exempt from the city and state B&O tax, would not have to pay the Employee Hours Tax.

A tax of $16.68 a year for each full time employee comes to $1.39 per month, or just 0.8 cents per hour. The Seattle Metropolitan Chamber of Commerce has claimed that the Employee Hours Tax is a tax on jobs and will lead to layoffs and reduced job creation. But at a rate of less than one cent an hour, there is no basis for this claim.

The real question is: Why shouldn’t profit-making businesses pay to support a publicly funded infrastructure that benefits them directly? Roughly 40% of downtown workers use Metro to commute to work. Businesses, not poor and working people, should shoulder more of the burden for a transportation system that gets employees to work.

Corporations always claim that any progressive measure, whether it is progressive taxation, mandatory paid sick leave or an increase in the minimum wage, will adversely affect them. In reality, no such correlations are found. We won $15/hour in Seattle despite business opposition because working people, the labor movement, and activists built a movement to fight for it. We need a similar involvement by all of you in order to be able to put enough pressure on the political establishment to pass our progressive proposal.

Will the Employee Hours Tax affect employees?

The Employee Hours Tax will not affect employees. Businesses themselves will pay $16.68 per full time employee per year, which comes to $1.39 per month, or less than a penny per hour.

Will the increase in the Commercial Parking Tax penalize ordinary people?

The Commercial Parking Tax is a direct tax on commercial parking lot operators, not on individual drivers who are paying to park. In the long run, capitalism ensures that businesses, which are purely interested in private profit, will try their best to pass on increased costs to consumers in the form of price hikes.

There is no empirical evidence, however, to show that such price hikes can be done instantaneously. Businesses have no choice but to absorb the increased costs in the short and medium terms. This is a good reminder, though, that we need to fight for systemic transformation in addition to fighting for reforms under capitalism. We should demand that big business pay their fair share for a world-class mass transit system so that households are freed from the expense of maintaining a car and carbon emissions are reduced.

The University of Washington administration and the Associated Students of UW (ASUW) claim that the increase in commercial parking fee will need to be passed on to students and staff. Is this claim justified?

Such claims are nothing new. UW administration said the same thing in 2010 when there was talk of an increase in the commercial parking rates. Since payments from commercial parking help fund the U-Pass, UW said that an increase in parking rates would penalize low-income students. That year, the commercial parking increase cost $2 million to UW. Contrast that with the lavish treatment of the then president Mark Emmert, whose total compensation package in 2009 was at an obscene $906,500 annually, making him the second highest earning public university president in the United States.

Those who care about social and economic justice, especially UW students, faculty, and staff,  should demand from the administration that UW absorb the full cost of the parking rate increase, which is a small fraction of what the university spends on paying its executives (current president Michael Young has a compensation package greater than $800,000) and on large projects such as the $50 million basketball training facility. Large institutions that have generous endowments, such as the University of Washington, are fully capable of absorbing the full increase in commercial parking rates.

On July 11th, the Executive Board of WFSE Local 1488, a union that draws together a broad range of workers on both the main campus of UW and the Harborview Hospital, unanimously passed a resolution endorsing the Licata/Sawant proposal. They’re in contract negotiations right now, and know that UW has the budget space to cover this tax without flinching. As Sawant has said before, “This comes down to a political battle: whether the council is interested in pushing back against that sort of bullying…and saying no. UW is totally capable of weathering that sort of impact.”

If the Sawant-Licata plan is approved by the Council, what is the process for raising funds to save Metro?

The following steps are involved:

• City Councilmembers (as the TBD board) vote to amend the TBD ballot measure to remove the increase in the sales tax
• Only the vehicle license fee goes on the November ballot
• The City Council votes to raise revenues for Seattle’s Metro services by passing the Employee Hours Tax and the increase in Commercial Parking Tax

Which organizations have endorsed the Sawant/Licata Plan?

• Seattle King County NAACP
• Puget Sound Advocates for Retirement Action (PSARA)
• Transit Riders Union
• Washington Federation of State Employees (WFSE) Local 1488

What can we do to ensure that the City Council adopts the more progressive proposal by Kshama Sawant and Nick Licata?

• Share this FAQ with others who have questions about our proposal, and share it on social media
• Join us in City Hall on July 17^th, 2pm – Transportation Meeting at City Hall Council Chambers
• Come give public testimony and join supporters in urging the City Council to support Kshama and Nick’s proposal. This is the first public meeting where the proposal will be discussed. It is critical that you join us.
• Please email and call your elected representatives and urge them to support Kshama and Nick’s proposal to remove the sales tax increase and replace it with a tax on businesses. They include the following:

Tom Rasmussen              tom.rasmussen@seattle.gov      206-684-8808

Sally Bagshaw                   sally.bagshaw@seattle.gov         206-684-8801

Tim Burgess                       tim.burgess@seattle.gov             206-684-8806

Sally Clark                          sally.clark@seattle.gov                206-684-8802

Jean Godden                     jean.godden@seattle.gov            206-684-8807

Bruce Harrell                    bruce.harrell@seattle.gov          206-684-8804

Mike O’Brien                      mike.obrien@seattle.gov             206-684-8800

Posted: July 8th, 2014 under Income Inequality, Progressive Taxation, Transit
Tags: Income Inequality, Progressive Taxation, Transit, UW