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May 16 2018

Seattle's Business 'Head Tax' Has Even Starbucks, Amazon in an Uproar

by Patrice Lee Onwuka

Seattle, Washington has a new idea of fight homelessness, but it's a bad one. Officials have passed a "head tax" on every employee of a big company working in the city. Major employers such as Starbucks and Amazon are furious, and rightly so. It will be workers who suffer.

The Seattle City Council unanimously voted to require that employers pay what amounts to about $575 a year for every full-time employee working in Seattle for the next five years. They estimate that the tax will raise about $47 million a year on average.

The about 585 businesses affected, those that generate at least $20 million of annual revenue in Seattlereportedly make up less than 3 percent of employers in the city. However, they generate a lion share on income.

The city says this money will help fight homelessness and put a dent in affordable housing. 

“We have community members who are dying,” Councilmember Teresa Mosqueda said before the 9-0 vote. “They are dying on our streets today because there is not enough shelter” and affordable housing.

However, Starbucks – one of the city's biggest employers – doesn't buy it. They will not allow the city to scapegoat them for spending without accountability. 

The company's senior vice president, John Kelly said in a statement:

"This City continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside. If they cannot provide a warm meal and safe bed to a five year-old child, no one believes they will be able to make housing affordable or address opiate addiction. This City pays more attention to the desires of the owners of illegally parked RVs than families seeking emergency shelter.

Amazon was against this – and a previous proposal that would have levied an even greater tax – and is not shy about their opposition. It's vice president Andre H also calling out the city for its spending habit:

"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."

While the mayor has said she will sign the bill, her statement hints that even this new cash infusion may not be enough to tackle their affordable housing and homelessness problems, noting:

"I will be taking urgent action to move people off our streets and into safer places... We will also continue to work towards a regional solution to homelessness because Seattle cannot go it alone."

The irony is that only days ago, she was signing a different tune:

"We cannot tax our way out of this problem, we won’t have a big enough population to do it.

...

"Right now the reality is if Amazon's building stays paused, we could lose hundreds of jobs just with carpenters and almost $90 million in salaries…” Durkan said Wednesday. “We don’t want to be a city where working people can’t have jobs.”

The risks of a head tax are all too clear. Amazon has already paused construction of a bigger campus and its future is now uncertain. That means workers who were counting on work are out of luck. In the longer terms, employers may consider relocating their headquarters from the city and taking their tax dollars elsewhere. 

There is also a good question about the effectiveness of Seattle's homeless programs. Are they working despite increased spending? If the real problem is housing affordability, getting people off the streets will be a futile effort, if they can't afford to live there.

Seattle needs to assess what makes living in the city so expensive and how to remedy that. The uncomfortable truth may be that left-leaning policies, such as taxing new housing construction, keep the supply of homes low and drives the costs of housing higher.

 

Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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