Seattle City Council Passes Reduced Head Tax

The measure decreases the original proposal by 45 percent, leaving some to question if it’ll raise enough to properly address homelessness.

On Monday, the Seattle City Council passed a $275-per-employee tax proposal on for-profit businesses that make over $20 million per year in gross revenue. The tax should raise an estimated $47 million per year—about 70 percent of which would go toward building affordable housing, and the rest to homelessness services and emergency shelters. It now awaits Mayor Jenny Durkan’s signature to become law, and will take effect in January 2019.

“This legislation will help us address our homelessness crisis without jeopardizing critical jobs,” Durkan said in a statement. “Because this ordinance represents a true shared solution, and because it lifts up those who have been left behind while also ensuring accountability and transparency, I plan to sign this legislation into law.”

The legislation was nearly half of the original proposal of taxing $500 per worker. Monday’s proposal was born of compromise after Durkan suggested that she would veto a large head tax, which would affect three percent of Seattle businesses. Durkan’s proposal to cut the tax in half, to $250 a head, was rejected by the City Council on Friday.

An amendment that shrunk the original proposal to $275 passed 8-1 on Monday, with Councilmember Kshama Sawant as the only dissenter. Shortly thereafter, the entire head tax proposal was passed with a 9-0 vote. The head tax would be set to expire on December 31, 2023, but the measure requires that the City Council members then re-evaluate the tax to determine whether to renew or scrap it.

Throughout the public comments section and the City Councilmember speeches, speakers noted that the amended proposal would not allow the city to accumulate the $410 million needed to address the region’s homelessness crisis, a number suggested by the recent McKinsey & Company study for the Seattle Metropolitan Chamber of Commerce. However, the majority of councilmembers felt that it was the strongest proposal that would be able to pass with the necessary votes that wouldn’t be vetoed by Durkan.

“I do feel that whereas the revenue that we would generate is not enough to fully address the problem and we would have to count on the resources that King County’s One Table process will be making as recommendations for additional revenue … we really have to stay focused on those needs,” Councilmember Lisa Herbold said. However, she considered it a win that the city passed a progressive tax that steers away from Seattle’s regressive tax structure. An April report by the liberal think tank Economic Opportunity Institute found that Seattle has the most regressive tax system in Washington, meaning that the poorest residents pay higher tax rates than the wealthy. This comes on the heels of a 2015 Institute on Taxation and Economic Policy report that showed Washington has the most regressive tax system in the country because of its high reliance on sales taxes.

Prior to casting his vote, Councilmember Mike O’Brien admitted that he had capitulated in order to reach a settlement. “I do think that with the $50 million a year that this will raise, there’s a lot of good things that we could do for the people who are suffering out there,” O’Brien said. “But we also know that … there’s a lot more work that needs to happen.”

As the sole dissenter to the amendment, Sawant accused her colleagues and Durkan of putting Amazon ahead of the poor. “Jeff Bezos has made so much money this year from the ballooning value of his Amazon stock portfolio that on average he has become $275 million richer every day,” Sawant said, wondering how “elected officials are still worried that he’s being taxed too much.” She also raised concerns about Durkan’s threat to veto the larger head tax after she accepted $350,000 from Amazon during her campaign. A five-year sunset on the tax would also require the passage of another city ordinance that would likely generate the same amount of controversy and big-business backlash as this one has, she warned. “I can guarantee that 4.5 years from now, Amazon will threaten to lay people off again, claiming that it is because of the tax again, and use that as leverage to attempt to prevent such renewal.”

The crowd’s disappointment in the shrunken ordinance was reflected in the chant shouted after the tax proposal passed: “We’ll be back for more!”

Amazon fought hard against the proposal earlier this month by halting construction of its tower, putting upward of 8,000 workers’ jobs on the line, if the proposal went through. “We are disappointed by today’s City Council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” Amazon Vice President Drew Herdener wrote in a statement. “City of Seattle revenues have grown dramatically from $2.8 billion in 2010 to $4.2 billion in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem—it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better.”

The Seattle Metropolitan Chamber of Commerce also took the side of large businesses in its opposition of the bill. “Taxing jobs will not fix our region’s housing and homelessness problems. If the Seattle City Council is serious about addressing these challenges, I hope we can count on their leadership on two critical issues: the HALA upzones, which address our outdated zoning, and aligning our fragmented homelessness services system,” Seattle Metropolitan Chamber of Commerce President and CEO Marilyn Strickland said in a statement.

Monday’s vote came after a 2017 U.S. Department of Housing and Urban Development report that shows that King County has the third largest homelessness population in the country. It also found that the county has the second highest concentration of veterans experiencing homelessness, trailing only Los Angeles County. Over 11,600 people were experiencing homelessness in January 2017, according to All Home’s annual one-night-count. Meanwhile, the death rate of Seattle’s homeless continues to rise; according to the King County Medical Examiner’s Office, 169 people experiencing homelessness died last year.

In response to the worsening crisis, Councilmember O’Brien and former Councilmember Kirsten Harris-Talley proposed a head tax last year that would have generated about $25 million annually. It was defeated by a 5-4 vote in November. An existing employee head tax was repealed in 2009 because of the recession, and Councilmembers tried to bring it back for several years with no success. Monday’s vote was the result of several years’ worth of effort from community organizers and politicians eager to find a solution to the homelessness crisis, as incremental as it may be.

The City Council bustled with activity Monday afternoon, as groups in attendance were split on the effectiveness of money to solve homelessness. Members of Speak Out Seattle! kicked off the public comments by proclaiming that they were the silent supermajority in Seattle that opposed taxing large businesses. Elisabeth James, Speak Out Seattle! co-founder, said that she wanted the city to use the money it already has to address Seattle’s most pressing issues. “We need to have better outcomes, and we need to be able to see results from our investments,” James said. Another SOS member piggybacked on her comments by adding that “asking for more money here is not a strategy,” and that law enforcement deserved more funding to address some of the “lawlessness” that had erupted in the city.

As some attendees waved red signs that read “Tax Amazon No Sunset Clause,” others shouted “We are ready to fight, housing is a human right,” between comments.

“If you vote for anything less than 75 million, you are voting to accept death,” said Anitra Freeman, a member of the grassroots homeless women’s group WHEEL and their project Women in Black. Citing rounded statistics, she continued, “With 60 percent of $50 million, Seattle will not be able to build enough low-income housing to even replace what we lose every year to development. We will not make substantial progress in slowing the rise of homelessness or the rise of homeless deaths,” she wrote in a follow-up email to Seattle Weekly.

Affordable-housing developers have noted a demand for projects that lack funding. As Ashwin Warrior, communications manager for affordable-housing developer Capitol Hill Housing, wrote in an email to Seattle Weekly, “Addressing our housing shortage will require more housing for people at all income levels, but nonprofit affordable housing plays a unique role in stabilizing communities and serving populations that have been, and continue to be, underserved by the private market.”

During her speech at the City Council meeting, Councilmember Teresa Mosqueda acknowledged that the fight had just begun. “With this effort today, I want to underscore my deep appreciation for labor, for the community at large,” Mosqueda said. “The budget is a reflection of our moral values and principles, and by our efforts today, we will be able to raise additional revenue–$50 million a year—to help fill the gap slightly, but a significant down payment in making sure that our budget more accurately reflects the values of this council, which is that housing is a human right.”

Update (May 15): A statement from Amazon has been added.