Last month, the Seattle City Council passed a head tax on businesses making over $20 million in revenue. All nine members of the council voted for the measure, which will impose a tax of $275 per employee at companies like Starbucks and Amazon. The business community has lambasted the ordinance, saying it imposes penalties on companies responsible for a lot of job growth in the region. Supporters of the measure argue that the tax’s ultimate purpose – to provide affordable housing to the city’s growing homeless population – trumps concerns regarding job growth.
Compromise and Backlash
The original version of the measure proposed a $500 head tax, but Mayor Jenny Durkan said she wouldn’t sign it, so the council came to a compromise of $275. Following the announcement of the new ordinance, a group of businesses pledged to attach an anti-head-tax referendum to the ballot in the upcoming midterm elections. Starbucks and Amazon have both promised $25,000 to support the tax repeal referendum, which is run by The No Tax on Jobs committee. So far, a total of $325,000 have been donated to support the repeal effort. The committee is composed of James Maiocco (of Push Pay), Phillip Lloyd (a Seattle Accountant) and Saul Spady (of Dick’s Drive-In).
Ad Campaign Against the City Council
As part of the movement to deride the city council, the Seattle Metropolitan Chamber of Commerce has led the charge in an ad campaign taking aim at the council for its purported lack of action regarding the homelessness issue. According to an investigation by The Stranger, the Chamber has not been forthcoming in terms of its financial relationship to the ad campaign (and the related website and Facebook page). This could be a violation of the city’s policy demanding transparency in election-related digital ad campaigns, though it might fall into the penumbra of the city’s regulations.
Adding to this array of preventative tactics, Amazon threatened the city, prior to the vote, with shutting down the construction of a new building in downtown Seattle. Kshama Sawant, an avowed socialist representing council district 3, led a march against the corporation, which is led by Jeff Bezos, the richest man in the world. Sawant was met with some resistance from the Iron Workers’ union who fear they might lose out on jobs if Amazon cuts back on its construction. After the Mayor signed the measure, Amazon recommenced construction of the new building but expressed doubt about whether it would continue with a planned project known as Rainer Square.
Amazon’s animus toward the head tax appears to be based in fears surrounding economic growth. “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,” Drew Herdener, VP of Amazon, said in a statement. He continued, criticizing the council’s spending habits: “The city does not have a revenue problem–it has a spending efficiency problem.” As noted by Minda Zetlin, of Inc.com, it’s difficult to know, without specific examples, whether Herdener’s insight is valid.
Drop in the Ocean
But will Amazon, the largest company to be affect by the ordinance, really take a dive under the new tax regimen? With 45,000 employees and $1.9 billion in profit during the last quarter of 2017, the company will have to dish out $10 million under the new head tax. In absolute numbers, that may sound high, but in relative terms, that’s merely half a percent of the profits accrued in the last quarter of 2017.
Over 500 Businesses Affected
According to an analysis by the Seattle Times, there will be around 585 businesses affected by the ordinance. The Times came to its conclusion using numbers from 2016. Since the tax will be calculated using 2018 data, the number of businesses could fluctuate. Nonetheless, it looks like grocery stores could be hit the hardest, as they have thin profit margins and lots of employees.
Missing the Point
With the third largest concentration of homeless people, Seattle could stand to pull in more tax revenue to bring down housing prices, which currently stand at a median of $820,000. That’s not to mention that 41 percent of residents spend over a third of their yearly income on rent. It’s also important to note that the recent increase in Seattle’s population is largely due to the influx of new tech jobs, and this has led to the rise in housing prices. Thus, the rhetoric about job growth might actually miss the point since it refuses to acknowledge the economic disparities on the ground and the imperative need to address the overwhelming problem of homelessness, caused in part by a certain kind of job growth.
The new tax is expected to yield $48 million in revenue to be spent on affordable housing specifically for the homeless population.