Head tax passes despite business outcry

Employees helping at a grocery store check out line
The Seattle City Council has unanimously voted to tax jobs to help fund measures to address homelessness. Photo: Tech. Sgt. Joshua Arends

The Seattle City Council has unanimously approved its head tax proposal that will impose a significant penalty on Seattle’s largest businesses in the name of raising money to address homelessness.

The tax would take effect at the beginning of 2019, requiring an estimated 585 of Seattle’s largest businesses to pay $275 per full-time worker per year. The tax has a sunset clause to end Dec. 31, 2023.

The council agreed to reduce the tax penalty from its original proposal of $500 per worker after a sustained outcry from the business community, heated debates, protests, and criticism from current and former public officials.

Nearly a decade ago, the council repealed a head tax of $25 per employee per year because of the challenge it presented to businesses during the recession.

Members of the business and labor communities strongly oppose the tax on the grounds that it will push current and potential employers out of the city. Those stakeholders also have expressed doubt that additional money will address the homelessness issue given that the council has already spent upwards of $160 million and the situation has not improved.

Unlike the previous proposal, the final tax plan does not require the head tax to transition to a payroll tax.

According to a recent McKinsey and Company report on the King County’s homelessness issue, the region would have to spend between $360 and $410 million to combat current levels of the problem.

In response to the rising likelihood of the tax plan’s passage, Amazon announced earlier this month that it would halt its downtown tower construction until the council’s vote and that it would begin looking at Bellevue for potential office space. Following the vote, an Amazon spokesperson indicated the company will continue construction but will remain cautious in the midst of the council’s “hostile approach and rhetoric toward larger businesses.”

Amazon is not alone in its stance; Zillow, Starbucks and 131 businesses including Redbox, SmartLabs and Expedia all have expressed their concern and disappointment over the council’s decision to penalize the city’s job creators.

During a May 14 public meeting of the full Seattle City Council, Councilmember Teresa Mosqueda said that she supported the tax because it focuses the council’s approach by investing in permanent housing programs and creating new shelter options in the community.

“We are trying to make sure that we both hear from the social workers, those who are experiencing homelessness, the housing advocates and experts…what we need most is the creation of housing units, and right now we don’t have the funding to do that.”

Council President Bruce Harrell said he understands Seattle residents’ anger and fear of what the city is becoming after hearing numerous comments on the tax plan.

“On one hand, people are looking at affordability of this city and death on the street…on the other hand people are saying ‘now you are trying to drive out business and good jobs and making policy or investment decisions that can kill our economy because we are a thriving city’.”

Harrell added that the city failed to convince the public that they will use the new revenue stream from the tax “wisely and strategically.”

However, Councilmember Kshama Sawant found fault with the amended proposal’s inclusion of a five-year sunset clause.

“Five years from now it would take another ordinance to have it continue…it is naïve of us to think that Amazon and other big businesses will not use a similar, brutal and extortionary tactic in four or five years in an attempt to stop the tax from being renewed.”

Jan Gee, CEO and President of the Washington Food Industry Association (WFIA), said that her industry’s problem is with the tax’s structure.

“This not just an Amazon tax, this is a tax on these family owned grocers, and stores like…West Seattle Thriftway, Metropolitan Market, Uwajimaya, your golden stars here in the community.”

Gee added that the tax will especially harm grocery stores because they have high gross sales, are labor intensive and make the lowest profit out of any industry, at one and one-half percent.

“You can see the tax structure has a disproportionate hit on the grocery industry,” she told the council. “I would ask you to slow down and look at what the impact is beyond Amazon and to your local family-owned businesses.”

Emily McArthur, Political Organizer for Socialist Alternative, however, urged the council to find even more money to address Seattle’s affordable housing and homeless problem, saying:

“…do not capitulate to Bezos’ bullying…we need $400 million a year to solve this problem, don’t water this down.”

Matt Dubin, attorney and candidate for State Representative in the 36th district, said the tax proposal will do little to solve the homelessness problem but would further divide the community.

“Over $200 million in tax dollars were spent on homelessness in King County last year,” he added. “That’s $17,000 for every homeless man, woman and child, and the problem got worse. “

Dubin asked the council to step back and work with members of the community to find a win-win solution for all.

The tax takes effect in January 2019 and Mayor Jenny Durkan has indicated she will sign the bill.


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