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Seattle City Council repeals business tax for housing and homeless services

The vote followed a heated public hearing

Seattle Municipal Archives, item No. 186192

At a sudden public hearing Tuesday, the Seattle City Council voted to repeal the Employee Hours Tax, commonly known as the “head tax,” which was passed less than a month ago. The repeal passed seven-to-two, with votes barely audible over chants from a gathered crowd.

The vote comes after a referendum effort to overturn the tax claimed to have more than enough signatures to put the tax to a public vote.

“This is not a great day for anyone,” said City Council President Bruce Harrell before calling the repeal to a vote. “But hopefully it’s not the end of anything; it’s the beginning of another process.”

The latest iteration of an employee hours tax to support housing and homeless services programs was put on the chopping block after a deal reached over the weekend, with seven out of nine members of the Seattle City Council—joined by Mayor Jenny Durkan—supporting a repeal proposed by City Council President Bruce Harrell. The City Council has scheduled a special hearing on the appeal, with a likely vote to follow, at noon on Tuesday.

The tax would have charged businesses making $20 million or more in revenue—popularly Amazon, but also larger Seattle businesses like Uwajimaya—about $275 per full-time employee, raising between $40 and $50 million a year, a compromise compared to the original version proposed in late April that would have charged around $500 per full-time employee and raised $75 million.

For some, the passage of the repeal was reluctant. “The fact is unless we’re building more affordable housing than we’re building today,” said City Councilor Lisa Herbold, an original sponsor of the tax bill who voted for the repeal, “our progress will be limited.”

“As I take this vote that runs counter to my values I do so with an inescapable irony,” continued Herbold, who represents District 1 on the council, saying that a “vast majority” of Seattleites believe misinformation about the homeless crisis. “We don’t have the time and we don’t have the resources necessary to change enough minds to succeed at the polls in November... this is not a winnable battle at this particular time with this particular measure.”

“It gives me no pleasure to have to repeal this law, because I believe this law was well-done,” said Lorena González, who also serves in an at-large position and also co-sponsored the tax. “We pursued a process of nine months to talk to people, to make concessions we never wanted to make. And we made those concessions... to address the reality that people are dying on our street.”

“I am tired of hearing ‘no,’” said González. “We cannot hear no to solutions we have identified that make sense, that need to be done.”

Only two were opposed to the repeal: Teresa Mosqueda, who serves in the at-large Position 9, and Kshama Sawant, who represents District 3.

“This was not a tax on jobs,” said Mosqueda, who said she couldn’t support a repeal without a replacement funding source in place. “This was a genuine effort, a compromise.”

“If we want to implement the Poppe Report,” added Mosqueda, referring to a 2016 report that lead to the previous mayor’s Pathways Home initiative, cited by many opponents to the tax, “we need to have money in hand.”

Sawant, citing Boeing’s constant threats to leave, Boeing getting tax breaks, and Boeing moving jobs anyway, put a finer point on it: “This is a cowardly betrayal of the needs of working people.”

The measure has sharply divided public discourse in Seattle, which was apparent during more than an hour of public comment—with one minute per speaker—at Tuesday’s noon hearing. Most speakers were on one side of the issue or another, either chastising Council for passing the tax in the first place (some volunteers with a referendum campaign) or for deciding to repeal the tax now. Others landed somewhere in between, saying that while the tax is not ideal, another solution should be in place before repeal.

While the meeting started at noon, advocacy started around City Hall early, with those in favor of the head tax taking turns hitting a gong more than 6,000 times for each unsheltered person in Seattle counted in a recent point-in-time survey.

The Employee Hours Tax was the latest of several proposals aimed at helping people sleeping outside and in shelters that has been dismantled after public outcry. An earlier version of the tax was sent back to the drawing board (that is, a committee) for revision after initially being proposed during the council’s city budgeting process. Other measures to provide leniency to people living in tents or cars while they waited for services—and the city waited for more affordable housing to come online—were also widely panned by the public and ultimately scrapped.

This tax proposal came as progressive tax options have been increasingly hard to come by. Washington State currently has no income tax and has one of the most regressive tax structures in the country. A recently passed Seattle city income tax is currently challenging state legal precedent that makes income taxes illegal; a lower court ruled that collecting income tax in Seattle is illegal, but if a higher court gives Seattle’s income tax a go-ahead, it could have statewide implications.

“This is the best tool we have,” said city councilor Mike O’Brien, a sponsor of both this employee hours tax and another one presented during the city budget process last year, reluctantly admitting he’d vote to repeal the tax. “We don’t have a lot of revenue options in this city... [the hours tax is] not a perfect tax, it’s the most fair.”

Meanwhile, King County’s latest point-in-time count of people experiencing homelessness found more than 6,000 people unsheltered, and almost 6,000 more in temporary shelters or transitional housing.

This article has been updated to add a fuller quote from City Council President Bruce Harrell.