Seattle City Council passes head tax on unanimous, 9-0 vote after reducing rate and adding sunset provision.

After a sometimes raucous public hearing, the Seattle City Council yesterday adopted a controversial head tax. The 9-0 unanimous council vote does not mean everyone was pleased with the measure. Backers of the original $500 per employee annual tax acknowledge it was “the best we could do,” as they reluctantly supported a compromise $275 per employee tax. 

The Seattle Times reports,

Starting next year, the tax will be $275 per employee, per year on for-profit companies that gross at least $20 million per year in the city — down from a $500-per-head proposal that Durkan threatened to veto…

About 3 percent of Seattle businesses will be taxed, raising about $47 million per year, according to the council.

The larger proposal would have raised $86 million annually, according to a council estimate Monday, based on updated data from the city’s budget office.

The council ordinance calls for the tax to end after five years, with renewal requiring a council vote in 2023.

The ST also provides a breakdown of affected businesses.

Amazon expressed disappointment with the decision in a statement (linked here through Geek Wire).

We are disappointed by today’s City Council decision to introduce a tax on jobs. 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. City of Seattle revenues have grown dramatically from $2.8B in 2010 to $4.2B in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem – it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better.

Geek Wire writes that Amazon will pay an estimated $11 million annually, rather than the $20 million it would have paid at the $500 per head tax. More from Seattle Times business reporter Matt Day here.

In an email to members, Metropolitan Seattle Chamber of Commerce president Marilyn Strickland wrote,

The Seattle City Council has just voted to enact a tax on jobs. We continue to believe that taxing jobs is not the best way to address regional homelessness – and independent pollingdone by KIRO 7 and Strategies 360 found that a majority of Seattle voters also oppose this tax.

We have been clear from the start about our opposition to this tax. With our partners in the business community and businesses of all sizes, we presented a united front:

  • The Council has demonstrated an alarming recklessness about spending. Even with record revenues, including $700 million per year from business taxes for the general fund, the City’s budget director has warned that the City is facing deficits in 2019 and 2020.
  • This is about using our resources on what works. Our region needs an aligned, accountable approach with a focus on outcome-focused solutions guided by the best practices laid out by Pathways Home and the Poppe report.
  • We need a regional approach with measurable outcomes to address this regional challenge and urge the City to coordinate its work with the One Table effort.

Thanks to each of you who stuck to this consistent message and who showed up when it mattered most. Together, we created significant pressure that made a difference.

Two months ago, many thought a permanent $75-150 million tax was a foregone conclusion. What passed today – a $45-50 million tax that sunsets in 5 years – is a bill that will hold Council responsible for producing results. We thank Mayor Durkan for her leadership on this issue in this highly politicized atmosphere, as well as Councilmembers Bagshaw, Johnson, and Juarez and Council President Harrell for raising important questions throughout the process.

Moving forward, the Chamber will continue to advocate for responsible, effective solutions that advance our vision of a region where businesses can flourish, and everyone has the opportunity to succeed and to access a thriving quality of life.

With respect to the regional challenges of homelessness and housing affordability, the next steps are clear. Our elected leaders can make long-lasting, sustained change through two policies that do not require a dime of revenue:

  1. Pass common sense zoning laws that will allow more housing to be built citywide and do not discourage development.
  2. Fix our fragmented regional system for homelessness services.

In closing, I would like to remind our business community that elections matter. We need responsible, accountable leaders on City Council. Looking ahead to 2019, we hope you’ll consider donating to our political arm, CASE, and I invite you to contact Jen Berg, our new PAC manager.

Thank you for your partnership throughout this process. I look forward to continuing our work together.

We expect we’ll be hearing more about this in the coming weeks. Stay tuned.