Report on Initiative 77
"Quality childcare programs for Seattle's children" - City of Seattle Primary Election Ballot Measure

Summary of Measure

Initiative 77 to the voters of Seattle would impose a 10-cent tax on espresso drinks to fund increased access to pre-kindergarten programs and quality childcare for low income and working families.  The tax would apply only to espresso drinks sold within the City of Seattle, not to drip coffee or other non-espresso drinks.  Small businesses with gross incomes of less than $50,000 per year would be exempt from the tax.  The total projected to be generated by the tax ranges from $1 to $10 million per year.

The proceeds of the tax would fund four programs, after deducting five percent for administration:

The program would be administered by the City’s Human Services Department.  An Oversight Committee of stakeholders would provide program input and review.  Committee members would be appointed by the Mayor with consent of the City Council. 

The problem the initiative seeks to address is the lack of sufficient access to pre-school programs and quality childcare for poor and working families.  Research on young children’s development has shown that children who have had high quality early learning and care have higher academic achievement, are healthier and are less likely to commit crimes as juveniles and adults.  Yet current public policy does not place a high priority on pre-kindergarten education and care.  Funding levels for federal Head Start and Washington State ECEAP programs are able to serve only one-third of the eligible children in King County.  With declining government revenues, hundreds of preschool slots have been cut.  The cost of childcare is unaffordable for many working families, yet childcare subsidy funds have also had to be cut. 

Another issue I-77 seeks to address is the very low pay and high turnover of childcare workers.  The consistency and quality of the care giver is a significant indicator of quality childcare and the initiative proposes to support improved wage, education and career opportunities for care givers through funding for the Early Childhood Education Career and Wage Ladder. 

Arguments FOR the Measure

The following arguments were put forth by the proponents of the measure:

• With the recent federal, state and local cutbacks, children from low income working families are losing ground.  There is a need for services critical to the well-being of Seattle’s youngest residents. 

• The measure will benefit not just the low income children who will be directly served; it will raise the level of achievement in the city’s kindergarten classrooms, benefiting all children.

• An espresso tax is a responsible and equitable revenue source because it taxes a discretionary purchase favored by middle and upper income consumers.  Espresso drinks are a robust and sustainable tax base that grows over time. 

• This source will raise $7 million to $10 million per year for programs and will make a real difference in children’s lives.

• The measure has been endorsed by numerous labor organizations, the Church Council of Greater Seattle, various Parent Teacher Associations, childcare operators and elected officials.

• The state, which is responsible for funding education, is not stepping up to this need; therefore local communities that are concerned about their children should do it on their own.

Arguments AGAINST the Measure

The following arguments were put forth by the opponents of the measure:

• This is an unfair tax that targets one product and one type of business.  The well-being of children is the responsibility of all and should not be funded on the backs of coffee shop owners.

• There is no “nexus” or relationship between the product being taxed and the service to be provided.  This is bad policy and sets the terrible precedent of dedicating an unrelated tax to a narrow purpose. 

• This is another example of the initiative process run amuck.  It sounds appealing at first, but it is law-making at its worst: special interest-funded paid signature gathering, no input by those affected, and none of the give and take of the legislative process. 

• While large operators like Starbucks and Tully’s would have no problem tracking espresso drinks, small cart or shop owners that have only a cash box would have no mechanism to track the number of espresso drinks they sell.  Other than tick marks in a notebook, there will be no way to audit or enforce the tax collection.

• The restaurant industry has been suffering a downturn since 9/11 and as a result of the recession.  Espresso drink sales are down significantly and this is another unfair burden.

• The City will be asking the citizens of Seattle to approve the Family and Education Levy next February.  If I-77passes, people might believe they have already just voted an increase for education and might vote No on the levy, causing great harm to Seattle schools.

• The proponents have significantly over-estimated the potential revenue from this source.  It would generate only about $1 million to $3 million a year, much too little to justify the administrative costs.

Recommendation and Rationale:  The League Opposes I-77.

• I-77 is a noble, but ill-conceived measure and should be rejected by Seattle voters.  Crucially, the projected revenue stream will not emerge.  At best, the tax is likely to generate $1.5 million annually—not the $7 to $10 million promised by proponents.  As the Washington Research Council observed, the proponents’ calculation mistakenly assumes that per capita espresso consumption will equal all gourmet coffee consumption in Seattle, without deduction for espresso and coffee consumed at home or drip coffee consumed at restaurants.  This and other mistakes make a big difference in the revenue forecast.

• Business and governmental compliance burdens are too great to justify the tax, when weighed against a realistic revenue forecast.  The $50,000 threshold for small businesses is far too low, excluding very few vendors from the initiative’s accounting and tax-reporting scheme.  Few coffeehouses account separately for espresso drinks.  Those with computer systems will need to reconfigure their systems.  Those vendors without computer systems will be heavily burdened.  Some may be forced out of business.  Also, the City will be faced with additional tax audit responsibilities and other compliance costs, which probably will not be covered by the 5% fixed overhead allowance built into the initiative. 

• The League believes that I-77 is bad public policy.  The League disfavors earmarked taxes, like I-77, because they hamstring the legislative and executive branches, depriving them of flexibility to adjust and allocate taxes and tax revenue streams to meet ever-changing public needs.  Additionally, restaurants and coffeehouses feel that I-77 unfairly targets them to pay for programs that should be the responsibility of all taxpayers.  Finally, I-77 may undermine support for Seattle’s Family and Education Levy, which will be presented to voters next year.

For all of these reasons, the League urges you to vote “no” on I-77.

See Also:

• About Ballot Issue Reports

• Press Release on I-77