Seattle Cuts ‘Head Tax’ on Big Businesses in Half, Gets Blasted by Amazon and Starbucks Anyway
Some people just don’t like a compromise.
PHOTO CREDIT: Getty Images
The Seattle City Council unanimously passed a very-much-reduced "head tax" this week. The tax will cost the city's largest employers $275 per year per employee, down from about $500 per employee in the original proposal, which Mayor Jenny Durkan had said she would veto.
The new tax represents a compromise, raising $48 million to address homelessness rather than the originally proposed $86 million. It has the unanimous support of all nine council members, enough to override a mayoral veto if one were forthcoming. But Durkan took part in the negotiations and supported the compromise. She says she plans to sign the new bill. "We saw what happens when we come together, sit down together, and work together--we can find common ground and get things done," she said in a statement.
The city plans to spend 66 percent of the funds to build 591 affordable housing units, about a third of the 1,700 units planned under the higher tax proposal. Most of the remaining funds will go for emergency shelter and trash pickup. Fewer than 600 new affordable homes seems hardly sufficient in a city with more than 11,000 homeless people, where one out of every 16 schoolchildren is homeless, and where homelessness was declared a state of emergency three years ago. But it's still too much for some of the city's wealthiest employers.
Amazon in particular, with 45,000 employees in Seattle will pay about $10 million per year under the new law. That's about one half of 1 percent of its $1.9 billion profit from the last three months of 2017 alone. Amazon founder Jeff Bezos, the richest and perhaps least philanthropic person on Earth, has made two of his few donations to help fight homelessness in Seattle. Nevertheless, his company so violently opposed the new tax that it actually halted construction on a tower it was building downtown, in a gesture apparently intended to intimidate the City Council. (It seemed to serve little other purpose--was the company really planning to leave a partially built tower on prime real estate unfinished?)
Now that the smaller tax is law, Amazon has resumed construction on its tower, but still says it may sublease some other planned office space. "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 said in a statement. He argued that since economic growth has increased revenues to the city since 2010 more quickly than the population has grown, Seattle's growing homelessness population means: "The city does not have a revenue problem--it has a spending efficiency problem."
Starbucks, which will also be affected by the new tax, took a similar position. "If they cannot provide a warm meal and safe bed to a five year-old child, no one believes they will be able to make housing affordable or address opiate addiction," John Kelley, the company's senior vice president for Public Affairs and Global Impact told a local news station. He went on to complain about the city's tolerance of illegally parked RVs (which often have otherwise homeless people living inside them). "Inefficient spending" has been the rallying cry for all who oppose taxes since the days of Ronald Reagan. Without specific examples of how the city is wasting money, it's hard to know if they're accurate in this case.
An analysis of 2016 revenues by The Seattle Times showed that 585 businesses had revenues greater than $20 million, the threshold for the new tax. (The Times said it too would be subject to the tax.) The hardest hit, it said, would be grocery stores, high-head-count businesses which often have revenues over $20 million but scrape along with very thin profit margins. Notable among them, the beloved family-owned Asian grocery emporium Uwajimaya. CEO Denise Moriguchi says the company makes only 10 cents of profit on every dollar of groceries it sells. She told the Times that her company might have to cut back on some of its perks to employees because of the tax.
That's bad, but Seattle's homeless problem is worse. The city's population continues to expand rapidly, now growing faster than during the Gold Rush. Last year, the city's population topped 700,000 for the first time ever. Only nine years ago, it was 600,000. (If you include the entire Seattle Metropolitan Area, total population is 3.5 million.)
The influx of new residents--many of them with high-paying tech jobs--is driving a rapid increase in shelter costs and may force more people out of their homes. The city simply has to do something to address its homelessness problem. The new tax seems like a reasonable start.