Seattle Repeals “Head Tax” Following Amazon’s Opposition

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On Tuesday, June 12, Seattle’s city council voted 7-2 to repeal a measure aimed at collecting tax from the city’s largest businesses, including Amazon and Starbucks, in order to raise funds for housing services. The council’s decision to repeal the measure was made just weeks after its unanimous vote to adopt it.

The Employee Hours Tax would have applied to companies that gross a minimum of $20 million per year and would have collected $275 per employee annually. The tax has created significant controversy since its proposal. Supporters of the tax included housing activists such as the Affordable Housing Alliance, which organized a “March on Amazon” in the leadup to the vote to adopt the measure. Some small business owners also voiced support for the tax by signing a letter to the city council in March, in which they argued that a tax on only the city’s largest businesses is the most appropriate option for targeting the city’s homelessness crisis.

Amazon, the city’s largest employer, paused construction planning on a project in downtown Seattle and threatened to sublease space in a newly leased building pending the council’s decision on the tax. After the tax passed last month, Amazon Vice President Drew Herdener told the Seattle Times, “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.”

Other Seattle business owners joined Amazon in its opposition to the tax, arguing that the tax would amount to an intentional slowdown of the city’s economy, as reported by the Seattle Times in May. Prior to the vote on the measure in May, some smaller business owners, including Denise Moriguchi, the chief executive of family grocer Uwajimaya, argued that the head tax would disproportionately impact businesses that gross the required $20 million to trigger the tax but would have a much larger relative impact on smaller companies. Uwajimaya has 250 employees in Seattle.

“The margins are way different” for smaller businesses than for Amazon, Moriguchi told the Times. “We make less than a dime on every dollar that we sell so it would definitely impact our bottom line. We would have to think twice about bonuses or other employee perks we do today.”

After the council voted to adopt the tax, a coalition of businesses organized a “No Tax on Jobs” campaign that gathered 49,000 signatures to promote a referendum to repeal the measure. The campaign quickly raised $300,000, including a $25,000 contribution from Amazon, according to NBC.

On Tuesday, the Seattle City Council submitted to the resistance from the city’s largest companies and voted to roll back the tax. Seattle Mayor Jenny Durkan tweeted, “It is clear that the ordinance will lead to a prolonged, expensive political fight over the next five months that will do nothing to tackle our urgent housing and homelessness crisis.”

Councilwoman Lisa Herbold explained to NBC that she voted for repeal rather than engaging in a political fight she described as “not winnable at this particular time,” noting that “the opposition has unlimited resources.”