In addition to advocating for a transportation funding measure that gives Seattle and King County options to pay for transit, Seattle City Council members, who visited the state legislature on Monday, made the case to legislators against a proposal by Gov. Chris Gregoire to “streamline” and centralize business and occupation (B&O) tax collections at the state level.
Although Seattle finance officials have said the proposal will cost the city as much as $43 million a year in fees, lost tax revenues, and lost penalties from B&O scofflaws, the state says those concerns are overblown, and that the city is exaggerating the potential downside of the proposal while ignoring the upside.
Council members say legislators seemed receptive to the idea of phasing in the new, centralized system or figuring out a way to simplify B&O tax collections—which business owners say are overcomplicated—without handing the state full responsibility for collecting the taxes and performing audits to make sure businesses are paying them.
Council president Sally Clark says both the governor and state Rep. Reuven Carlyle (D-36), a sponsor of the legislation, agree that although “Nobody’s wild about how B&O taxes are being collected at the local or state levels, having the state hold the whole bag isn’t going to work.”
For one thing, council member Sally Bagshaw says, simply setting up the new system, which would involve creating a new web site where businesses could pay their taxes and setting up the infrastructure to accurately compute, debit, and redistribute those taxes, would cost millions of dollars at a time when the state is facing multi-billion-dollar revenue shortfalls. “The state just isn’t prepared to do it,” Bagshaw says. “They’ve got a really, really old computer system.” Upgrading computer systems is notoriously expensive and subject to unexpected cost increases; replacing King County’s computer system, for example, took more than a decade and cost more than $130 million.
Council president Richard Conlin said another option the city is exploring is to allow cities to “opt in” to the statewide system, rather than requiring them to participate. Although big cities like Seattle and Bellevue, which oppose the proposal, probably wouldn’t opt in, smaller cities, including some of the 207 that don’t currently collect B&O taxes, might choose to do so.
