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Seattle Now Has A 'Head Tax,' But Few Are Celebrating

Elaine Thompson
AP Photo
Members of the public look on at a Seattle City Council meeting where the council was expected to vote on a "head tax" on May 14, 2018

The Seattle City Council passed a "head tax" on businesses in a 9-0 vote Monday, following weeks of debate that dominated city politics and came down to last-minute negotiations over the weekend. 

Arguments over the tax divided residents over the question of whether an influx of new money to respond to the city's homelessness crisis is worth risking a potential impact to jobs and growth — and upsetting leaders of Seattle's economic powerhouse, Amazon.

In the end, celebrations were muted. Those on one side of the debate had fought for a much higher tax while those on the other had pushed for no tax at all. 

After a weekend of marathon negotiations, City Council members rallied around a tax that was a little over half the size of the one sponsors rolled out in April. The final bill imposes a tax of $275 per employee per year on companies that bring in more than $20 million in annual revenue.

Many supporters rallied around a higher tax of $500 per employee per year. Activists who packed the City Council chamber made their case for that version of the bill until the last available minute. 

But they found themselves constrained by political realities. Seattle Mayor Jenny Durkan signaled she might veto the higher tax and called for compromise. Supporters on the council did not have the super-majority needed to override her.

"We could not find a path to get the number of votes we needed to put this in place," said Council Member Mike O'Brien, a sponsor of the higher tax. "And so I am acknowledging that I am going to vote for this because I’m settling for this level of service."

After the votes were cast, activists' chants in the meeting chamber quickly shifted from celebratory ("When we fight, we win!") to tinged by disappointment ("We'll be back for more!"). 

KNKX reporter Will James spoke live with All Things Considered host Ed Ronco minutes after the Seattle City Council approved a "head tax" on May 14, 2018

The head tax, officially called the employee hours tax, is estimated to raise between $45 and $50 million dollars a year over its five-year life. It starts next year and expires at the end of 2023 unless council members vote to renew it. 

Durkan said Monday that she would sign the bill. But she stressed city leaders must restore taxpayers' faith that they are spending money wisely on anti-homelessness efforts. She said she would convene an oversight committee to monitor spending. 

"I have been told over and over again by people, 'I would pay more if I thought it would work,'" she said. "'But I don’t know that it’s working. It seems the more I’ve paid, the bigger the problem has gotten.'"

More than half the tax revenue is earmarked for the construction of housing designed to be affordable to people who are currently homeless. It would also fund emergency shelter as well as wage increases for caseworkers on the front-lines of the homelessness crisis.

For supporters, the tax bill was also about bringing balance to the state's "regressive" tax system, referring to a tax structure that results in poor residents bearing a higher tax burden than wealthy ones. 

For some liberal activists, it was also about getting the city's biggest employer to pay what activists deemed to be its fair share. "Tax Amazon" signs became ubiquitous at pro-tax rallies and City Council meetings. 

Amazon's leaders opposed the head tax and played a central role in the debate, ramping up pressure on city leaders by moving to halt a planned expansion downtown, effectively threatening to cancel an estimated 7,000 jobs. 

Amazon's move rallied members of building trades unions against the tax over fears it would result in the loss of blue-collar jobs. Those union members emerged as the main voice of opposition to the proposal.  

Amazon leaders on Monday criticized the City Council for passing the tax, but said they would forge ahead with construction of a downtown office tower. 

"While we have resumed construction planning for Block 18, 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. 

Will James is a former KNKX reporter and was part of the special projects team, reporting and producing podcasts such as Outsiders and The Walk Home.