Washington: Seattle reverses head tax on large employers

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Less than a month after unanimously passing an ordinance that would have imposed a per-employee head tax on large companies, the Seattle City Council voted on June 12 to repeal the tax.  The tax was meant to generate roughly $47 million a year to fund affordable housing and homeless services.

The tax would have applied to companies with more than $20 million in annual revenue, or approximately 3 percent of businesses in the city.  Starting next year, those companies would have been charged about $275 per year for each full-time employee.

Proponents of the tax argued that large, profitable companies ought to shoulder some of the burdens resulting from the city’s rapid economic growth.  As Seattle continues to attract high-paying jobs and affluent workers, the city is grappling with soaring housing costs and rising levels of homelessness.  In 2017, the city had the third largest homeless population in the United States and spent roughly $68 million on homeless services.

The tax drew sharp criticism from businesses including Amazon, the city’s largest employer.  Just days after the tax was passed, the No Tax On Jobs campaign, a coalition of businesses opposed to the tax, began gathering signatures to place a repeal referendum on the November ballot.  Amazon and Starbucks each contributed $25,000 to the campaign.  Campaign representatives announced ahead of the June 12 council vote that they had more than enough signatures to reach the ballot.

In the face of this mounting pressure from the business community, members of council voted 7-2 to repeal the tax.  Several members expressed reluctance in voting for the repeal and vowed to find alternative funding sources to address the homelessness crisis.  Amazon, for its part, praised the vote as “the right decision for the region’s economic prosperity,” while pledging that it is “deeply committed to being part of the solution to end homelessness in Seattle and will continue to invest in local nonprofits” that work with the homeless.

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