In a fast about-face, Seattle may cave to Amazon, overturn landmark corporate head tax


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Kim Komando, special for USA TODAY

SAN FRANCISCO — Just a month after Seattle passed a controversial corporate head tax aimed at Amazon, the city council is poised to rescind it after facing a ferocious backlash by some of the largest businesses in town.

The shift comes as many cities, not just Seattle, struggle to deal with rising levels of income inequality, gentrification, homelessness and changes wrought by an influx of large numbers of highly paid tech workers. The anger and frustration over this confluence of issues has led some to focus on large tech firms such as Amazon in Seattle or Google in Silicon Valley, as the cause. 

In Seattle, a 4% rise in homelessness in the past year as rents have risen has been the flashpoint for these issues. A tally of the homeless conducted in January by the All Home coalition found 8,599 people living in the streets, in vehicles, in abandoned buildings or in tents in the city.

The Seattle city council is feeling a real sense of urgency as it relates to homelessness,” said Jeffrey Shulman, a marketing professor at the University of Washington who studies growth in Seattle. “We’ve got people dying on the streets, it’s a visible crisis affecting everyone, not just those in need.”

That helped lead to a May 14 vote by the city council unanimously passing a measure requiring companies with revenues of more than $20 million a year pay an annual $275 tax per employee. The vote came after weeks of hearings, demonstrations, heated public meetings and a threat by Amazon to stop construction of its newest Seattle tower and to pull out of leasing another.

But pushback from Amazon, Starbucks and other large firms resulted in a surprise shift by the council on Monday when its president, Bruce Harrell, announced he had scheduled a special meeting on Tuesday about a repeal of the tax. 

The unprecedented reversal comes as a campaign called No Tax on Jobs, funded by area businesses, was also preparing to submit petition signatures to qualify for a referendum on the tax for the November ballot.

In a statement Monday, Seattle Mayor Jenny Durkan and all but two of the City Council, said  “We heard you. This week, the City Council is moving forward with the consideration of legislation to repeal the current tax on large businesses to address the homelessness crisis.”

Three of those council members were the original sponsors of the tax

“It is clear that the ordinance will lead to a prolonged, expensive political fight over the next five months that will do nothing to tackle our urgent housing and homelessness crisis,” the statement said. 

But councilmember Lisa Herbold, another of the original sponsors, countered that turnabout was the result of a ploy to convince Seattleites that the “increased levels of human suffering we see in our city is caused by government inefficiency rather than by the Gilded Age level income inequality.”

City constraints

Washington state, and by extension Seattle, faces an especially difficult situation when it comes to funding constraints. It is one of the few states in the nation with no income tax, which is illegal under state law. Instead it must rely on property taxes, which can only be raised so high, said Tom Cooke, a professor at Georgetown Univesity’s McDonough School of Business.

A tax on how many employees a corporation has, based on its revenue, is one way for elected officials to create a source of revenue that doesn’t directly affect individual voters.

“That’s historically how we’ve build football and baseball stadiums, by taxing things like hotels and rental cars because it doesn’t affect the individual voter,” said Cooke.

However Seattle quickly realized that the proposed tax, which would have gone into effect in January, could also potentially affect how many employees companies might hire and even if they would stay in town. Construction workers marched against the tax. Amazon, in particular, has been on a building spree in the city.

In the end, “the whole thing unfolded in a really bad way. I don’t think anyone has come out of this looking good,” said Shulman.

Still, he’s hopeful that this could be a refresh, signaling a more collaborative approach to address this crisis rather than a demonization of business

“Businesses need to address the homeless challenge,” he said. “And I’ve talked to many Amazon employees and it’s just a drain on moral.”



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