For
Release Sept 2, 2003
Municipal
League Opposes Seattle Initiative 77
I-77 ("Quality childcare programs for
Seattle's children") would impose a 10 cent tax
on espresso drinks sold at Seattle restaurants, coffeehouses and espresso
stands. Tax revenues would be deposited into a special purpose account
earmarked exclusively to fund early childhood programs in Seattle. Five
percent of the revenues are devoted to the City’s administrative costs. The
City’s Human Services Department would administer the program under the eye of
an oversight committee.
Proponents of the measure point to the desperate need for
early childhood programs to serve Seattle’s working low-income families.
Congress and the Washington legislature have cut funding levels for federal
Head Start and Washington State ECEAP programs to the point that these programs
are able to serve only one-third of eligible children in King County. To help
bridge the gap, I-77 expects to raise $7 to $10 million a year from
discretionary purchases of espresso drinks. Small vendors, having gross
receipts of under $50,000 per year, are exempt from the tax.
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:
