Last night, the Seattle City Council voted on a watered-down version of an employee hours tax—widely known as the “head tax”—on businesses making $20 million or more, largely from Amazon. Soon after, Amazon resumed plans for short-term expansion, but expressed wariness about long-term growth in Seattle.
Earlier this month, Amazon had paused construction of a new tower—known as Block 18—“pending the outcome” of a full Seattle City Council vote on a proposed tax on high-earning businesses, which at the time would have cost around $500 a year per full-time employee and raised $75 million a year to build affordable housing and provide additional homeless services.
City Council ended up passing a smaller version of the tax, which drops the amount to $275 per employee and will raise $40 to $50 million. In light of the revision, Amazon announced it would resume construction on Block 18, but that doesn’t signal an endorsement of the tax.
“We are disappointed by today’s City Council decision to introduce a tax on jobs,” said Amazon Vice President Drew Herdener in a statement. “While we have resumed construction planning for Block 18, 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.”
Herdener said that Seattle “does not have a revenue problem—it has a spending efficiency problem,” a frequent talking point among the bill’s opponents, especially the Seattle Metropolitan Chamber of Commerce.
But a recent report by firm McKinsey, developed in partnership with the Chamber, did find a need for new revenue—specifically, around $400 million in spending to solve the homelessness crisis. (The Chamber commissioned another study from firm Eco NW which found that the tax in its original form would result in job loss, disproportionately affecting low-wage jobs.)
The tax, which does not affect small and medium-sized businesses—only those with $20 million or more in taxable gross receipts under the city’s Business and Occupation Tax—will apply to 585 businesses, which, in addition to Amazon, includes Starbucks and Uwajimaya, and expires after five years. It exempts nonprofits, hospitals, and healthcare providers that provide at least 25 percent of services to patients covered by Medicare and Medicaid.
The version passed by Council includes an evaluation of the economic impacts and a committee to oversee spending.