Seattle implements tax on big business to provide for homeless

The Seattle City Council approved a so-called "head tax" for major companies, including Amazon, to help with the region's widespread homelessness problem. Proponents see the vote as a step toward urban equality while critics worry about damaging the local economy. 

Ted S. Warren/AP
Opponents and supporters of a proposal to tax large local businesses including Amazon and Starbucks to fund efforts to combat homelessness hold signs at City Hall on May 9, 2018 in Seattle. The city has one of the highest homelessness rates in the US.

Seattle's largest businesses such as Amazon and Starbucks will have to pay a new tax to help fund homeless services and affordable housing under a measure approved by city leaders.

The City Council unanimously passed a compromise plan Monday that taxes businesses making at least $20 million in gross revenues about $275 per full-time worker each year – lower than the $500 per worker initially proposed. The so-called "head tax" would raise roughly $48 million a year to build new affordable housing units and provide emergency homeless services.

The debate over who should pay to solve a housing crisis exacerbated by Seattle's rapid economic growth comes after weeks of tense exchanges, raucous meetings, and a threat by Amazon, the city's largest employer, to stop construction planning on a 17-story building near its hometown headquarters.

Amazon, Starbucks, and business groups sharply criticized the council's decision after Monday's vote. They called it a tax on jobs and questioned whether city officials were spending current resources effectively. One state Republican leader said he would seek legislation next year to make clear that a city tax on employees, wages, or hours is illegal.

Seattle-based Starbucks had harsh words for its hometown leaders. It accused the city of spending without accountability while ignoring that hundreds of children sleep outside.

"If they cannot provide a warm meal and safe bed to a 5-year-old child, no one believes they will be able to make housing affordable or address opiate addiction," Starbucks' John Kelly said in a statement.

But worker and church groups and others cheered the tax as a step toward building badly needed affordable housing in an affluent city where the income gap continues to widen and lower-income workers are being priced out.

"People are dying on the doorsteps of prosperity. This is the richest city in the state and in a state that has the most regressive tax system in the country," said councilmember Teresa Mosqueda, who wanted a larger tax but called the compromise plan "a down payment" to build housing the city needs.

For Seattle's liberal City Council, the discussion Monday centered not so much on whether there should be a head tax but how big it should be. Four bill sponsors initially pitched a tax of $500 per full-time employee a year but a compromise proposal emerged over weekend after they couldn't muster the six votes needed to override a potential veto by Mayor Jenny Durkan.

Councilmember Lisa Herbold, a bill sponsor, said the revenue isn't enough to fully address the problem given the city's dire needs and human suffering but it was "the strongest proposal" they could put forward given the veto threat.

Proponents of the tax say too many people are suffering on the streets, and while city-funded programs found homes for 3,400 people last year, the problem deepens. The Seattle region had the third-highest number of homeless people in the United States and saw 169 homeless deaths last year. The city spent $68 million on homelessness last year and plans to spend even more this year. The tax will provide additional revenue.

"This legislation will help us address our homelessness crisis without jeopardizing critical jobs," Ms. Durkan said in a statement.

Other cities have implemented similar taxes, but critics say Seattle's tax could threaten the booming local economy and drive away jobs.

Nearly 600 large employers – roughly 3 percent – would pay the tax starting in 2019. Amazon, the city's largest employer with 45,000 workers, would take the biggest hit.

Amazon Vice President Drew Herdener said in a statement Monday that the company was disappointed.

While Amazon has resumed construction planning on the downtown building, he said "we remain apprehensive about the future created by the council's hostile approach and rhetoric toward larger businesses, which forces us to question our growth here."

He noted that city revenues have grown dramatically and that the city "does not have a revenue problem – it has a spending efficiency problem."

Councilmember Lorena Gonzalez shot back that she was "equally disappointed" in Amazon's reaction to the council's vote and said she thinks "their tone in this message that is clearly hostile toward the city council is not what I expect from a business who continues to tell us that they want to be a partner on these issues."

Before the vote, she said the city "has an obligation to take care of the people who are surviving and suffering on our city streets."

Shannon Brown, who has been living a tiny home at a south Seattle homeless encampment, said there's simply not enough housing for the city's poorest people.

"I live in a little shed, but it's better than living in a tent or in a sleeping bag on the street," she said. "There's no away I can afford to live in Seattle. I don't understand why businesses think it's wrong to help."

John Boufford with the International Union of Painters and Allied Trades said he didn't understand the rhetoric against Amazon, which he noted provides good jobs for thousands of people.

"They're driving this economic engine," he said. "I'm confused about why the city of Seattle is fostering an adversarial relationship with businesses in this city."

This story was reported by The Associated Press.

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