Espresso-tax debate has foes steaming

Foam or no foam, a latte in Seattle may soon come served with an extra dollop of taxation if city voters approve the dime-a-cup tax proposed for espresso drinks on the Sept. 16 primary election ballot.

The espresso-tax initiative — which would raise millions of dollars to go toward preschool and day-care programs — has attracted national attention, much of it incredulous.

Charging an extra tax on Seattle's iconic drink strikes some as weird, like a cheesesteak tax in Philadelphia or a jambalaya surcharge in New Orleans.

"When we heard about it we were just sort of stunned. We thought it was nuts," said Mike Ferguson, spokesman for the Specialty Coffee Association of America.

Backers of the initiative say it's nothing to laugh about. They tout it as a creative way to tax a "luxury item" to pay for a good cause.

"It's a dime; it's nothing. It's just a dime for kids," said John Burbank, executive director of the Economic Opportunity Institute, a nonprofit group that came up with the initiative, formally known as the Early Learning and Care Campaign.

All those dimes, backers estimate, would add up to $7 million a year or more in revenue to subsidize day cares and preschools. The money would pay for wage increases and training classes for preschool teachers, subsidized preschool tuition for low-income families and other grants to day cares and preschools.

The money would be distributed by the city's human-services department and monitored by a 14-member oversight committee made up of preschool teachers and administrators, parents, city officials and others.

The tax would apply only to espresso drinks such as lattes, mochas and cappuccinos — whether they're caffeinated or not. It would not apply to regular drip coffee. Businesses with gross annual sales of less than $50,000 would be exempt.

'An accounting nightmare'

The initiative has provoked howls of protest from critics who say it makes no sense to single out espresso for this kind of tax.

"What's next? Is there going to be a salmon tax to pay for literacy programs?" said Robert Nelson, president and chief executive officer of the National Coffee Association.

Diane Symms, who owns Lombardi's Cucina in Ballard, said she would immediately pull the espresso machines from her restaurant if the initiative passes.

"It's going to be an accounting nightmare," said Symms, echoing the comments of other business owners who claim the tax will be difficult to administer because their cash registers are not set up to tax espresso separately from other drinks.

Symms, who raised two children as a single parent, resents the idea that espresso drinkers ought to be saddled with the bill for other people's preschool.

"We're already paying for education," Symms said. "I think the parents are responsible for the children until they go to the public schools."

But Burbank said the payoff for society is worth the small price to espresso consumers. His institute cites research showing kids who attend high-quality preschools fare better in public schools and are less likely to fall into a life of crime. That saves society money in the long run, supporters say.

Tim Sheehan, a teacher at Whitman Middle School, said the initiative would help close the "achievement gap" hindering low-income children. "That's a burning issue that's always bothered educators," he said.

Tax may offset budget shortfall

At Small Faces, a preschool and day care in Seattle's Crown Hill neighborhood, the espresso tax would help restore a state subsidy that recently was axed by the Legislature, said Lynn B. Wirta, director of the center, which has 145 kids a week enrolled in classes for ages 2-1/2 to 12.

"This is a city that cares about its coffee and its kids," said Wirta.

The state program gave the center an extra $3,500 a month, which enabled Wirta to offer higher wages for workers who took additional training courses in child development. The pilot state project, which started in 1999, was eliminated this year by the state as part of narrowing a $2.65 billion budget shortfall. The espresso tax would create a similar program for the city.

Wirta said she's perplexed by the vehement opposition to the tax. People who regularly plunk down $3 for a latte at Starbucks won't even notice an extra 10 cents — less than they tip their barista. "The affluent of Seattle are the people who drink a lot of espresso," she said.

That rhetoric behind the initiative — which holds that rich people drink espresso and should be taxed extra for it — has enraged some critics.

"Somebody has decided espresso is a luxury or a sin," said Nathaniel Jackson, co-owner of Cafe Allegro in the University District. "I don't look at espresso as a luxury item. It's just a different way of drinking coffee."

The initiative says "espresso beverages, as distinguished from other forms of coffee, are luxury items" and adds "it is appropriate to tax the privilege of engaging in the sale of a luxury item in order to allocate tax responsibility among persons who prefer a luxury item and can thus better afford to pay the tax."

Furthermore, if you oppose the tax, contends a campaign fact sheet, "you are opposing the children of our city."

That's nonsense, said Teri Esensten, who, along with her husband, owns Cafe Stellina in the Central District. Her one-room shop, with simple plywood floors, is already struggling to get by, she said, but would probably not qualify for the $50,000 exemption.

On a recent sunny day, the shop was empty except for the Esenstens, their 4-year-old daughter, and a stray kitten they'd rescued from near her school.

Esensten said they'd have to buy a cash register to administer the tax, at a cost of several thousand dollars. And they'd have to raise their prices, which is always risky for a small business.

"We feel singled out. I wouldn't be irate if the sales tax went up across the board," she said.

But Burbank said taxing espresso, as opposed to some other product, has several advantages.

The city is prohibited from levying an income tax, and there are already many competing property-tax levies. If the tax were on a more durable product, such as bottled water, people could simply stock up on it outside the city to avoid the tax. And taxing espresso would bring in taxes from commuters and tourists who visit Seattle.

Starbucks opposes tax

Burbank said he tried to persuade Seattle-based Starbucks to back the initiative early on, but was rebuffed.

Instead, the company joined the opposition campaign, dubbed Joined to Oppose the Latte Tax — JOLT. The campaign has raised nearly $70,000, including $12,500 from Starbucks and nearly $15,000 from the Greater Seattle Chamber of Commerce.

Starbucks spokeswoman Audrey Lincoff said the company opposes it because it would be "bad tax policy" to single out espresso for a special tax.

The company, which has its global headquarters and about 80 stores in Seattle, declined to reveal its estimates on how much the tax would cost the company.

Supporters of the tax proposal have raised nearly $117,000, including $48,000 from the Economic Opportunity Institute and $8,000 from the Seattle Education Association.

Burbank and other supporters point out that this would not be the first tax where there is no strong link between the product taxed and the service it funds. For example, taxes on food and beverage purchases at restaurants, taverns and bars in King County pay for the debt on Safeco Field. And a state tax on soft-drink syrups pays for drug enforcement and violence-reduction programs.

Backers estimate the tax will bring in $7 million to $10 million annually, but city budget analysts disputed those numbers last year, saying the revenue would be $1.8 million to $3 million.

If someone drank two lattes a day, seven days a week, they'd pay $73 a year due to the tax, assuming all those were purchased in Seattle. If they don't want to pay, people can simply choose to drink something else, Burbank said.

Proponents say tax will pass

Nationally, only 4 percent of people reported consuming espresso drinks on a daily basis, according to a 2003 survey by the National Coffee Association, which has tracked those numbers for decades. That compares with about 50 percent of the population who said they drink coffee daily.

But in Seattle, visiting coffeehouses has been a daily ritual for years.

According to survey data from New York-based market-research firm Scarborough Research, about 28 percent of Seattle-area residents reporting having visited a coffeehouse or coffee bar in the past 30 days. The research does not show whether they ordered espresso or just drip coffee.

The research also indicates that wealthy people are more likely to patronize coffeehouses than are low-income people.

It found, for example, that 37 percent of those with annual household incomes of more than $100,000 had been to a coffeehouse in the past month, compared to only 23 percent of those with annual household incomes of less than $25,000.

While critics may scoff, Burbank predicts Seattle will embrace the measure. He cites polling done by the campaign last year that showed broad support.

He may be right. If there is anything Seattleites love more than espresso, it just might be taxes.

Voters here have bucked the Tim Eyman trend, opposing the anti-tax crusader's statewide initiatives while embracing local tax increases for parks, libraries, low-income housing, community centers, a monorail and an opera hall.

Burbank said espresso businesses would be better off channeling their opposition to the tax into a campaign in support of it. If it passes, he said, they could advertise that every shot of espresso they sell benefits the children of the city.

"I think it could become a real selling point," he said.

Jim Brunner: 206-515-5628 or

Seattle Times news researcher Gene Balk contributed to this report.

Seattle's espresso-tax proposal

What it would do:

Place a 10-cents-a-cup tax in Seattle on all espresso beverages (defined as "any beverage prepared for immediate consumption containing half an ounce or more of espresso regardless of caffeine content, whether served hot or cold.")

What it would pay for:

Five percent would go to the city for administrative costs. The remaining tax proceeds would be spent as follows:

• 55 percent for preschool programs for 3- to 5-year-olds — for example, local programs modeled after Head Start. At least 10 percent of the children served would have to be low-income.
• 20 percent for grants to low-income families to subsidize preschool and day-care costs.
• 20 percent for subsidies for preschools to offer pay raises to workers who complete training courses.
• 5 percent to subsidize training for home-based day-care providers.

Who would control the money:

The city's Human Services Department would administer the program. The initiative would also create a 14-member oversight committee consisting of teachers, parents, school and city officials and others. That panel, appointed by the mayor and subject to City Council confirmation, would decide exactly which programs to fund.

Members would be unpaid, but could be reimbursed for expenses of attending meetings, including child care.