Seattle City Council Repeals Employee Head Tax

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By Paul Shukovsky

Seattle’s City Council repealed an employee-hours tax on Amazon.com and other large employers, in the face of a repeal effort funded by the business targets.

The repeal is a victory for major corporate players in the city like Amazon and Starbucks Corp. that have expressed vocal opposition to being charged about $275 per year for each full-time employee. The tax revenue would have targeted housing for the homeless.

The council June 12 voted 7-2 to repeal the underlying ordinance that would have imposed the tax beginning Jan. 1, 2019, on businesses with annual incomes exceeding $20 million. The $275 per-year levy was based on a rate of $0.14323 per hour worked. It was expected to generate roughly $48 million in revenue from 585 companies, about 3 percent of those doing business in Seattle. The ordinance was unanimously passed in May.

The revenue would have funded affordable housing and homeless services. An influx of highly paid technology workers has contributed to a spike in housing prices and homelessness, as well as an exodus from Seattle of blue-collar and middle-class people.

‘Not Good Faith’

The campaign against the tax was ignited after Amazon—which has more than 45,000 employees in its headquarters city—first threatened to shut down growth if the council passed the tax, then donated $25,000 to an initiative petition campaign to repeal the tax after it passed last month.

Amazon’s actions led Councilmember Teresa Mosqueda—one of the two no votes on repeal—to tell Bloomberg Tax just before the council session convened that Amazon hadn’t acted in good faith in the process that led to passage of a compromise version of the tax that dropped it to $275 from $500. “I asked Amazon what can we do so we get to a spot that is workable. And when Amazon agreed to the unanimous bill that was passed, within 48 hours they turned around and changed their mind. That’s not good faith negotiations. That is a hollow handshake.”

Several speakers from the audience expressed disdain toward Amazon Chairman Jeff Bezos, with one noting that as “the richest man the world,” he could personally pay the tax for 1,000 years and still be the seventh richest man in the world.

In a statement, Amazon said the vote “is the right decision for the region’s economic prosperity. We are 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.

‘Tax Amazon Movement’

The repeal came as the coalition of business behind the No Tax on Jobs repeal effort was poised this week to submit petitions to put on the November ballot a repeal of the tax. The coalition attracted major corporate support with pledges such as $30,000 from the Washington Food Industry Association, a statewide trade association of independent supermarkets; convenience stores; and coffee houses. The low-margin supermarket industry has frequently been called particularly vulnerable to the tax, and supermarket giants Kroger Co. and Albertsons Cos. each pledged $25,000. Starbucks also pledged $25,000.

The coalition also drew some support from the Seattle populace, claiming that some 2,000 people volunteered to help push for repeal, with some joining paid signature-gatherers on the streets of the city.

In retreat, the politically progressive council vowed, before casting the vote to repeal the tax, to find alternatives to funding affordable housing solutions.

Councilmembers who voted for repeal have expressed concern that a fight over the ballot measure to repeal the tax would have been deeply divisive for the city and could have resulted in the tax failing at the ballot box.

Mosqueda, who has close ties to organized labor, told Bloomberg Tax before the vote: “Nothing has changed in terms of what’s happening on the streets. There are still people sleeping on the streets, dying on the doorsteps of prosperity. We need to act with urgency. We will continue to fight to find solutions.”

“Jeff Bezos is our enemy,” said Councilmember Kshama Sawant, who voted not to repeal the measure. “We have to fight big business,” said Sawant, who invited her supporters to join her later this month in a planning session for the “tax Amazon movement.”

To contact the reporter on this story: Paul Shukovsky in Seattle at pshukovsky@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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