Taxing in the Name Of: Seattle Head Tax Repealed

Back in May the Seattle City Council unanimously passed the “head tax” under the auspices of raising funds for the homeless and to ease the city’s affordable housing crisis. But in the face of opposition from Seattle’s largest businesses, and a certain legal challenge to the law itself, the council has reversed themselves.

NBC News:

Seattle’s city council voted on Tuesday to repeal a newly enacted “head tax” imposed on the city’s largest companies, including Amazon.com, in the face of apparently insurmountable big-business opposition to a tax meant to fight an affordable housing crisis.

The 7-2 vote in favor of repeal capped an acrimonious public hearing interrupted by chanting supporters of the tax. It came as momentum was building for a referendum drive against the measure, just weeks after it was unanimously adopted by the council and signed by the mayor.

“This is a cowardly betrayal of the needs of the working people,” Councilwoman Kshama Sawant, a leading proponent of the tax who voted against repeal, said to thunderous applause moments before the council completed its vote.
But Councilwoman Lisa Herbold said she was reluctantly voting for repeal rather than drag the city through a political fight she called “not winnable at this particular time.”

“The opposition has unlimited resources,” she added.

Seattle Times columnist Danny Westneat was not impressed by the council’s deliberations before, during, or after the vote:

Some on the council blamed “big business,” which was predictable. A few called out Amazon in particular. Kshama Sawant got the most personal about this, as is her specialty, bluntly declaring that, “Jeff Bezos is our enemy.”

Other council members insisted with great passion, voices rising in anger, that the city is in fact doing a great job on housing the homeless, and so has simply been misunderstood.

But most jarring, to me, was that they blamed you. Yeah, you, the witless public.

“The Chamber of Commerce has convinced the vast majority of Seattleites of the old, conservative trope, that the increased level of human suffering in this city is caused by government inefficiency,” railed Councilmember Lisa Herbold.

She added she had pushed for a head tax on Seattle companies in 2016, 2017 and now again in 2018, and seemed perplexed that none of these three efforts worked.

Possible simple explanation: Maybe it’s just not a good idea?

The notion that the famously liberal and generous Seattle public is now a rabble of dupes easily wowed by anti-government propaganda ­– now that’s some world-class political blame-shifting! More likely, I bet, is that Seattleites came to feel that high levels of taxation directly on jobs, of all things, might not be the smartest.

A living example of this was right in council chambers on Tuesday. Had this fight just been about evil Amazon, who knows, the head tax might have prevailed. A bigger problem was the “Uwajimaya Effect.”

“I’m with Uwajimaya – not Amazon, Uwajimaya,” Denise Moriguchi, chief executive of the beloved Japanese grocery, pointedly began her testimony Tuesday. “We’ve been employing people in the Pacific Northwest for 90 years, and the head tax is not the right answer.”

Game over right there. Why in the world would you tax grocery stores, anyway? The council never had an answer for that.

Still others where far less concerned about the monetary and taxation problems and focused on what they saw as a “betrayal” of social responsibility:

CBS News:

City leaders underestimated the frustration and anger from residents, businesses and others over not just a tax increase but also a growing sense that homelessness appears to have gotten worse, not better, despite Seattle spending millions to fight it. It poured $68 million into the effort last year and plans to spend more this year. The tax would have raised roughly $48 million annually.

But a one-night count in January found more than 12,000 homeless people in Seattle and the surrounding region, a 4 percent increase from the previous year. The region saw 169 homeless deaths in 2017.

Many supporters called the repeal a betrayal and said the tax was a step toward building badly needed affordable housing. They booed council members, imploring them to keep it and fight a coalition of businesses trying to get a referendum overturning the tax on the November ballot.

Several leaders, including three who sponsored the legislation but voted to repeal it, lamented the reversal and conceded they didn’t have the resources to fight the referendum.

Councilwoman Lisa Herbold said it “was truly our best option” and that she repealed it with a heavy heart. She lashed out at business interests for blaming the problems on government inefficiencies.

“Gutless!” someone shouted as she explained her rationale. She and others said they didn’t want to spend the next several months in a political fight that would do nothing to address urgent needs.

Councilwoman Teresa Mosqueda voted against the repeal, saying the lack of a replacement strategy would mean more months of inaction.

“It was not a tax on jobs,” she said, calling it “a much needed down payment to our housing crisis.”

Whatever your opinion on the tax itself, the one thing that was very clear was a long and protracted fight over the head tax was coming. Lead by Amazon, Starbucks, and the other corporations that felt targeted by the ordinance, many were pushing for a ballot initiative prior to the repeal vote.

Amazon.com, the city’s largest employer, was at the forefront of a coalition of businesses running a well-financed campaign to place a repeal referendum on the ballot for the November elections.

The tax would have applied only to the city’s largest companies by revenue, those grossing at least $20 million a year. It was expected to be borne by about 500 companies.

Opponents had already collected nearly 49,000 signatures from voters in support of a repeal initiative, well more than the 17,000 needed to qualify for the ballot, according to the Downtown Seattle Association, a business group which led the petition drive.

The effort quickly raised $300,000, including contributions of $25,000 each from Amazon and coffee retailer Starbucks , another major Seattle stalwart, and $30,000 from a grocers trade group, said Jon Scholes, president of the Seattle Association.

As for where the head tax drama goes from here, Danny Westneat offered this suggestion the Seattle City Council:

For starters, I would humbly suggest turning what you just did upside down. Come up with a detailed plan to help the homeless. Get buy-in on that, and then ask for money. That formula has a strong track record with voters in this city.

With a similar measure up for a vote in Mountain View, California to see if Google’s hometown will install a head tax of its own:

It remains to be seen whether Seattle’s retreat will have a chilling effect on other cities considering taxes on big tech companies to help mitigate the effects of growth.

The City Council in Mountain View, California, where Google is based, will vote June 26 on whether to put a similar measure before voters in November. The “Google tax” aims to alleviate transportation woes and high housing costs in the Silicon Valley city south of San Francisco.

Mountain View Mayor Lenny Siegel said Seattle’s about-face hasn’t changed his support for the tax.

“It appears that we have a better relationship with our business than Seattle does,” Siegel said.

He said Google hasn’t taken a position on the proposal and that no “groundswell” of opposition has materialized from the Internet search giant and other companies.

No matter what happens, the debate on corporate taxation and how municipalities use that revenue rages on.

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