It’s a fight where the battlefields are drawn by political jurisdictions, casualties are measured by lost economic output, and victories are determined by new employers and job creation.
In the statewide skirmish that’s intensifying over Washington’s business climate, the Seattle City Council’s unanimous vote approving a $275 per-employee job tax earlier this month may be the official opening shot in the new ‘battle for Seattle’.
Events precipitating the City Council’s May 14 vote strongly foreshadowed what was to come. The first sign of trouble was when Amazon announced plans for a second headquarters last year. In May, a planned rally in front of the Amazon Sphere by Councilmember Kshama Sawant was crashed by members of Iron Workers Local 86 after Amazon suspended construction of a building in anticipation of the head tax vote.
A May 8 open letter posted by Madrona Venture Group Managing Director Matt McIlwain and signed by more than 100 CEOS warned that “the message it sends to every business: if you are investing in growth, if you create too many jobs in Seattle, you will be punished. Sending this message to entrepreneurs, investors, and job creators will cause far greater damage to Seattle’s growth prospects than the direct impact on the businesses being taxed.”
The responses at the local, regional and state levels, respectively, have been swift – and weighted toward the opposition. Corporate giants such as Amazon, Starbucks and Vulcan have pledged more than $350,000 for an initiative to overturn the job tax ordinance. Although former Attorney General Rob McKenna believes the tax is legal, Minority Leader Mark Schoesler (R-9) has proposed a state law banning them.
Speaking at the Washington Policy Center’s Solution Summit in Spokane, Schoesler called the head tax “the most regressive tax we’ve seen. And I call it a ‘regressive’ tax, because it is. When you see a great startup…they don’t necessarily make money in the near term. We’re punishing them on the way up. It is every bit as nasty as a B&O tax.”
He added: “I’m really not that concerned about the financial future of Seattle. I am, though, concerned about my colleagues that represent King County that watch HQ2 leave. And I’m worried about the state’s share of revenue, because when they’re building those buildings, 6.5 percent of that is coming back to the state of Washington in sales tax.”
The economic relationship between Washington and Seattle was summed up by Sen. Guy Palumbo (D-1) at the WPC’s Solution Summit in Bellevue. “We’re all in it together. Whether you like it or not, Seattle is the economic engine of our state.”
Although Palumbo is “pretty confident” the head tax will get repealed, other cities on the West Coast aren’t waiting around to take advantage of it. The Greater Phoenix Economic Council has started an ad campaign to get Seattle businesses to move there. Already Amazon has announced plans to close its Seattle-based 130-person delivery support unit and move the jobs to Phoenix, though it says the decision was not in response to the head tax.
The day the Seattle head tax was approved, a letter to an undisclosed Seattle executive from the Greater Sacramento Economic Council touted the region’s business climate, specifically citing the lack of a head tax as well as its adjacency to greater venture capital opportunities.
Bellevue Mayor John Chelminiak has also expressed concern with how Seattle’s policies affect the rest of the region. In an interview with Geekwire, he said, “People recognize Seattle as the hub of this area. If you’re out selling yourself somewhere, you’re going to say that you’re in the Seattle area, because people recognize the name Seattle.”
Other regional and state leaders such as King County Executive Dow Constantine and former governor Christine Gregoire have also come out against the head tax.
Lens reached out to Governor Jay Inslee’s office for comment on the head tax and the voter initiative but did not receive a response.
In the meantime, some local, regional and state lawmakers are eager to not only distance their communities from Seattle’s policies, but also to capture any of its economic ‘leakage’. Pierce County and Tacoma city officials have proposed a $275 per-employee tax credit for new qualifying jobs that are created. Sen. Steve O’Ban (R-28), who represents Pierce County, has proposed a similar measure for rural counties struggling with higher unemployment rates.
In a statement he wrote: “Washington shouldn’t lose jobs because our largest city’s tax policy punishes job growth. If employers want to relocate, they should know that other counties are business-friendly and welcoming.”
Seattle’s fate in the conflict may depend on whether residents decide to keep the current council intact in the upcoming election. During WPC’s Spokane Solutions Summit, an audience member asked: “When are we going to fire the (Seattle) City Council? Sawant is not the problem. It’s the eight other people who vote with her and the mayor that signs it into law.”
McIlwain replied: “A number of the companies in Seattle have been reluctant to be public about challenging the city council on policy issues.” However, he added he’s “hopeful” that recent actions by companies such as Amazon, Alaska Airlines and Starbucks help these companies understand “the importance of being outspoken, because it will never end.”
Most residents aren’t happy with the council’s recent vote. A survey conducted by Strategies 360 for KIRO-TV found 54 percent of Seattle voters oppose the job tax.
McIlwain said that “what’s important here is that the community…the citizens, the businesses, our broader state community speak out against this idea (head tax) and hopefully overturn it at the ballot in November. Because I think that will send at least a message that the city council can’t run roughshod on bad policy ideas over the citizens.”