Seattle’s new 'head tax' will charge major companies to aid the homeless

After weeks of negotiation, Seattle passed a key tax on big business.

After weeks of negotiation between Seattle’s city council and Mayor Jenny Durkan, the council voted unanimously this week to pass a so-called “head tax” on major businesses in Seattle to pay for homeless aid programs.

The vote was a boon to homeless advocates but appeared to infuriate the city’s big business community.

The new tax will apply to all major companies in Seattle grossing more than $20 million including Amazon and Starbucks, and will charge each business $275 per full-time employee each year. The tax will affect about 3 percent of the city’s business community, according to figures released by the city council.

Beginning January 1, 2019 and expiring five years later, the new tax is expected to collect about $48 million a year, significantly less than the initially- proposed goal of $500 per employee, which could have gathered about $75 million per year. For her part, Mayor Durkan had originally proposed a goal of collecting $40 million annually.

"This was a tough debate,” Durkan said at a news conference on Monday. “Not just here at City Hall, but all across this city. No one is saying that this will solve everything, but it will make a meaningful difference."

About two-thirds of the money collected will be spent on new affordable housing units housing. The rest of the money will be spent on more immediate needs, including rental subsidies, shelter beds, and garbage services.

Homeless advocates said the tax was a vital part of the city’s plan to alleviate the living conditions of Seattle’s poorest residents. “We have community members who are dying,” Councilmember Teresa Mosqueda said before the vote, according to The Seattle Times. “They are dying on our streets today because there is not enough shelter.”

Yet major companies with bases in Seattle began expressing their disapproval of the new deal almost immediately. As the city’s largest employer, Amazon will be taking the biggest hit. Company officials characterized the new tax as a “hostile approach to larger businesses that forces us to question our growth here."

Earlier this month Amazon put two large construction projects in the city on hold until the tax decision had been made.

Officials at Amazon are “disappointed by today’s City Council decision to introduce a tax on jobs,” Drew Herdener, an Amazon vice president, said in a statement released to ABC News.

“City of Seattle revenues have grown dramatically from $2.8 billion in 2010 to $4.2 billion in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period,” Herdener said in the statement.

“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.”

Starbucks also slammed the new decision while questioning the city’s fiscal accountability.

The big retailers aren’t the only ones raising concerns and questioning Seattle’s ability to address the city’s homeless problems thus far.

CEO Marilyn Strickland from Seattle’s Chamber of Commerce contended that "taxing jobs will not fix our region's housing and homelessness problems."

The Seattle Times reported that Seattle’s King County homeless population is the third largest in the United States, but housing rates continue to climb parallel to homeless rates.

Council President Bruce Harrell said in a statement that he stands by the decision the city has made.

“Our goal is to have a successful and vibrant business community – one of the best in the country – and at the same time assist our most vulnerable and strategically invest in affordable housing. One does not exclude the other.” But Republican State Sen. Mark Schoesler said he's ready to introduce a bill to repeal the tax."We sent a message from our state's largest city and largest county that we're going to have punitive taxes on job creators,” Sen. Schoesler told KOMO News on Monday night. “That reflects poorly on my members in King County and our state as a whole."