The Seattle City Council voted on May 14 to levy a head tax on businesses in the city that make more than $20 million annually in gross revenue to fund homelessness services.
The tax charges $275 per employee annually for large corporations and businesses in the city. The approved tax was lower than the $500 per employee tax that was originally proposed, but higher than the $250 tax Seattle mayor Jenny Durkan wanted. Unlike the original proposal, the tax that passed will expire in five years.
The decision has been met with apprehension by some on the Eastside, including the Greater Kirkland Chamber of Commerce, which issued a statement in opposition.
“We acknowledge affordable housing and homelessness is an issue, but we oppose the head tax as a policy to address it, particularly without a clear plan to disburse funds. We urge the Seattle City Council to listen to the business community to continue economic stability and viability in the region,” the release from the Greater Kirkland Chamber of Commerce read.
Kirkland Chamber director Samantha St. John said the board of directors voted to oppose the head tax not out of opposition to affordable housing for those experiencing homelessness, but because they feel businesses already contribute to local and state taxes. Washington state has a business and operations tax that is leveled on gross tax receipts instead of net earnings. St. John said they were concerned large corporations like Amazon could leave Puget Sound if taxes are raised.
“What Seattle does impacts us as a region,” she said. “I think we will get some people coming over to the Eastside and enjoying our friendlier policies over here.”
Amazon vice president Drew Herdener issued a press release on May 14 saying he was disappointed by the city’s decision to pass the head tax, calling it a “tax on jobs.” The release also stated they had resumed construction on two buildings in Seattle, which were put on pause ahead of the City Council’s vote.
“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 $2.8 billion in 2010 to $4.2 billion in 2017, and they will be even higher in 2018,” the release said.
OneRedmond CEO Bart Phillips said he believes the head tax was a bad decision that could have long-term impacts on Seattle and surrounding cities. While a head tax could push companies like Amazon, Tableau and Accenture towards Eastside locations, it could also lead them out of the state too.
“In national and global markets there is no differentiation between Seattle and the three cities of the Innovation Triangle,” Phillips said in an email. “We are all Seattle and we all have this head tax. We have already had to explain to a couple of clients that things are different here.”
However, some businesses offer a different view. Redfin CEO Glenn Kelman said in a blog post on May 15 that, while critical of the head tax, he understood why it passed. Kelman said RedFin did not support the head tax, but it also did not fight against a proposed personal income tax, which many in the business community also opposed.
“Simply opposing every tax won’t work. Before Redfin was asked to sign this year’s anti-tax petition, we were asked to sign another, opposing a statewide income tax on wealthy folks in 2010. The business community also fought the city on a legally dubious income tax in 2016. We did not join either of those efforts. Redfin’s execs feel that now that the business community has blocked a reasonable statewide tax, we can’t be surprised the city is proposing unreasonable taxes instead,” Kelman wrote.
Kelman suggested the city upzone more neighborhoods to allow greater housing density, build as much housing of all types as quickly as possible and re-examine higher taxes on corporate income or high personal income.
Seattle has had a head tax in the past, which was repealed in 2009 as the economy soured during the recession. Businesses were taxed at $25 per employee anually beginning in 2006. Other cities on the Eastside, including Redmond, Bothell and Kirkland, have employee-based taxes that help pay for utilities and offset city infrastructure expenses. Bothell, for example, charges nearly $700 annually for businesses with up to 100 employees, and an additional $12 per employee for every worker a business employes over 100.
Amazon has already been expanding to Bellevue as reported in the Puget Sound Business Journal. The company already leases the 354,000-square-foot Centre 425 and the journal cited an anonymous source who said Amazon is also looking at moving in to Tower 333 and Summit III, which offer a combined 744,000-square-feet of office space.
This comes weeks after T Mobile and Sprint announced their plans to merge and center their new company at T Mobile’s existing Factoria headquarters. T Mobile recently applied for remodel applications for five buildings at their headquarters.
The Seattle head tax is expected to raise an estimated $47 million annually with 70 percent going towards building affordable and transitional housing, with the rest going to homelessness services and emergency shelters. It will take effect next January and was approved unanimously by the Seattle City Council. Seattle is facing one of the most severe homelessness crises in the nation as rents in the region continue to skyrocket.
According to the 2017 King County Count Us In homelessness report, there were more than 11,600 people experiencing homelessness in King County with around 630 people on the Eastside. This is significantly lower than the more than 8,500 people experiencing homelessness in Seattle. Of those, 30 percent said they became homeless after losing a job, followed by 20 percent who said addiction was the main reason and a combined 20 percent who said eviction or divorce and separation led to homelessness.
Seattle City Council members said they needed to implement a head tax to help fund services and because efforts to implement an income tax have been unsuccessful in the state. According to a 2015 report by the Institute on Taxation and Economic Policy, Washington state has the most regressive tax in the nation, meaning poor and working class families pay a disproportionately larger percentage of their income on taxes than wealthy residents.
The poorest 20 percent of Washington residents pay nearly 17 percent of their income in taxes while the top 1 percent only pays 2.4 percent. This largely stems from the state’s reliance on sales taxes, a lack of a personal income tax and a gross receipts tax instead of a corporate profits tax, the report said.
According to coverage from the Seattle Weekly, affordable housing developers have noticed that a demand for projects often lack funding. Ashwin Warrior, with the affordable housing developer Capital Hill Housing, told the Weekly that “Addressing our housing shortage will require more housing for people at all income levels, but nonprofit affordable housing plays a unique role in stabilizing communities and serving populations that have been, and continue to be, underserved by the private market.”