Repeal Efforts Already Underway For Seattle's New Head Tax

Local business leaders are slamming the Seattle City Council's decision to impose a head tax on the city's top employers. Calling it a "tax on jobs," those who oppose the ruling say the city is doing too little to help the homeless with the funds it already has. There is little trust that the new funds raised will put much of a dent in solving the problem, but it does make Seattle seem less business-friendly, they said.

The new tax will charge companies that gross more than $20M a year a $275 per employee head tax. That is about half of what the originally proposed tax would have been. 

Just days after the city council's unanimous vote to pass the tax, a petition to repeal it is already circulating.

A coalition of businesses, which calls itself No Tax On Jobs, began a campaign to overturn the head tax through a citizen referendum, according to The Seattle Times. The group has until June 15 to gather 17,632 signatures to send the issue to the ballot in November. 

The council expects the tax will raise about $47M, which will be used to fund new low-income housing and homelessness services. At least 585 companies would be subject to the tax.

The homeless crisis is an issue that is affecting all major cities. In 2017, the number of homeless people in the United States grew for the first time since 2010. The Department of Housing and Urban Development reports that in 2017, 11,643 people were counted as homeless in the Seattle/King County area. That puts the Emerald City third behind New York City and the city and county of Los Angeles.

Nationally, on one single night in January, about a half of a million people were counted as homeless in the United States.

Cities grappling with this epidemic are watching closely as Seattle sorts through this quagmire.

“As a business owner and resident, it was with dismay that I saw the proposed head tax legislation and its passage through city council,” barrientos RYAN co-owner Maria Barrientos said.

She said many companies donate to organizations working on the homeless issue, but the council’s actions sent a strong message of an unfriendly business environment. 

“I know several businesses that gross over $20M a year and have been in Seattle for 50 to 70 years and that have slim profit margins, and they are now being penalized,” she said.

Barrientos is concerned that a very vocal minority is dictating the council’s decisions. She feels the council should be reaching out to include the opinion of other residents and businesses. 

“Issues have become so polarized in our largely liberal city,” she said. “It is of great concern that we have an increasingly myopic group of people representing the entire city.”

The original tax plan that went before city council would have charged companies $500 per full-time employee and would have raised approximately $75M per year. That plan would have cost Amazon, which has about 45,000 Seattle workers, approximately $20M a year.

On May 2, Amazon halted construction on its Block 18 office building until after the council vote. It also announced it may sublease its space in the skyscraper under construction at Rainier Square. It had planned to add 7,000 to 8,000 employees to that space.

After the city council vote took place last Monday, Amazon restarted construction on Block 18, but it has not committed to filling those office buildings with its own employees.

Amazon has donated permanent space to Mary's Place, a homeless shelter for women and children. The 47K SF will be able to house 65 families, or about 220 people and pets.

Starbucks, which has supported several initiatives to address the homeless crisis, came out strong against the head tax, releasing a statement to several media outlets from John Kelly, senior vice president of Global Public Affairs and Social Impact: “The city continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside.”

Many who oppose the tax feel that the city has not used its resources well so far. While the new tax will provide funds for the city, many business leaders agree with Kelly and hope the city will take this opportunity to use funds to improve the homeless problem.

Swinerton’s Vice President Division Manager Dave Worley recognizes the homeless problem exists in Seattle, as it does in other cities.

“I hope [the council] will be proud of their decision and do the right thing with the money they have,” he said.

Downtown Seattle Association’s senior manager of media relations and issues management, James Sido, said the association appreciates Mayor Jenny Durkan’s attempts to modify the job tax in Seattle.

“However, a tax on jobs at any level is bad economic policy and will negatively impact Seattle’s economy and city tax revenues,” he said. “New polling shows that a majority of Seattle voters also feel this is bad public policy. Reducing homelessness will require a transparent, coordinated and comprehensive countywide strategy.”

Sido said the council should coordinate with Durkan and King County Executive Dow Constantine to take steps toward implementing a regional approach to solve the homelessness problem.

“It is through greater collaboration, not taxing jobs, that we will help more people off the streets in our communities,” he said.

State Sen. Mark Mullet, an Issaquah Democrat, plans to introduce legislation next year that would stop cities from implementing both a Business and Occupation tax and a head tax.

Seattle is not the only Puget Sound area city to impose a head tax on employees. Lynnwood, Kirkland, Redmond and Vancouver all charge head taxes as part of their city licenses. Lynnwood charges $93 a year for each employee working more than 15 hours a week. Kirkland charges $105 per full-time employee.

Nationwide, other cities have tried different tax approaches to address the homelessness issue.

In Denver, a portion of the state’s cannibis taxes are used to fight homelessness. Last year, Los Angeles voters approved a quarter-cent sales tax increase to help fund homelessness services. Revenue received by the county was $44M from October and November 2017. The tax went into effect in October. The tax, called Measure H, is expected to raise $355M a year for 10 years to help homeless people transition into affordable housing units.

San Francisco homeless advocates are considering a November tax measure that would target businesses with gross receipts that exceed $50M annually. The tax would raise more than $300M a year. It would be a half-percent surcharge.

If Seattle’s new head tax is not repealed, it will take effect in 2019.