SEATTLE — Less than a month after it passed unanimously, the $275-per-employee tax on businesses grossing more than $20 million annually is set to be undone by the Seattle City Council. On Monday, Council President Bruce Harrell announced that he is sponsoring legislation to repeal the contentious tax estimated to generate $47 million annually for homelessness services, emergency shelters, and affordable housing that is poised to take effect in January 2019. Harrell expects the council to vote on the repeal legislation during a special council meeting on Tuesday at noon. A joint statement in support of the legislation released by Mayor Jenny Durkan and seven councilmembers on Monday indicates that the measure has enough votes to pass, casting uncertainty on the source of additional funding needed to address the city’s rampant homelessness crisis.
Monday’s announcement follows the successful efforts of the No Tax on Jobs campaign to gain the 17,632 valid signatures needed on a petition submitted by June 14 that will put a referendum on the November ballot. Backed by Amazon, Starbucks, Vulcan, and other businesses, the campaign had collected $285,317 in hard contributions, according to its latest filing on Monday evening.
In a statement, Durkan and Councilmembers Harrell, Lorena Gonzalez, Sally Bagshaw, Rob Johnson, Mike O’Brien, Lisa Herbold, and Debora Juarez conceded that the ordinance would cause a “prolonged, expensive political fight over the next five months that will do nothing to tackle our urgent housing and homelessness crisis.” They indicated that an array of challenges including a lack of affordable housing, and access to mental health care, would need to be “addressed together as a city, and as importantly, as a state and a region.” Although the city leaders stated that they remain “committed to building solutions that bring businesses, labor, philanthropy, neighborhoods and communities to the table,” they have not yet proposed another measure to bring in additional funding.
The Seattle Metropolitan Chamber of Commerce, which took the side of big businesses in its opposition of the head tax, agreed that greater collaboration between governmental and regional institutions is needed to address the homelessness crisis. “The announcement from Mayor Durkan and the City Council is the breath of fresh air Seattle needs,” Seattle Metropolitan Chamber of Commerce President and CEO Marilyn Strickland said in a statement Monday. “Repealing the tax on jobs gives our region the chance to addresses homelessness in a productive, focused, and unified way.”
The legislation that Durkan signed into law last month was nearly half of the original proposal of taxing $500 per employee, and was reached through compromise between the mayor and the councilmembers. During the public comments section of last month’s city council meeting, speakers contended that the reduced head tax would not cover the $410 million needed to address the region’s homelessness crisis, a figure suggested in a McKinsey & Company study for the Seattle Metropolitan Chamber of Commerce.
During a press conference Monday, Harrell ascribed the timing of the repeal to complaints from residents and businesses about the city’s spending habits. “Before you impose a tax, particularly one as significant as the employee hours tax, I think you have to convince the public that you are using the money wisely, and I don’t think that that persuasion has been there,” Harrell said, as show in video footage from KOMO News. He called the repeal an opportunity to “press the reset button” and to consider alternative solutions to homelessness rather than putting the onus on businesses.
The ordinance, which would’ve affected three percent of businesses, would have be a change of pace for Seattle. An April Economic Opportunity Institute report showed that Seattle has the most regressive tax system in Washington, meaning that the poorest residents pay higher tax rates than the wealthy. A 2015 Institute on Taxation and Economic Policy report also stated that Washington’s tax system that heavily relied on sales taxes was the most regressive in the country.
Although the majority of the councilmembers consider the repeal an opportunity to find common ground with different groups, Councilmember Kshama Sawant called it a “capitulation to bullying by Amazon & other big biz” in a tweet Monday afternoon. “This backroom betrayal was planned over weekend w/o notifying movement (incl. my office),” her tweet continued. Councilmember Teresa Mosqueda joined Sawant as the only other member who opposed the repeal.
“I respect my council colleagues and the Mayor tremendously. I also am incredibly driven by the sense of urgency to get folks inside. For me, this is a call for us to not walk away from the need for revenue to be in hand at the end of this year. We know that we had a path forward that would have allowed for us to have almost $50 million beginning of the beginning of January,” Mosqueda said at a press conference at City Hall on Monday afternoon. “I want to make sure that we have the assurance that there will be revenue, people will be housed, shelters will open, and the healthcare needs of those who are living outside can be met. Right now, I continue to have the utmost respect for them and look forward to working with them and the community at large to find a progressive revenue option so we can move forward.”
In the eyes of organizations that represent low-income workers, big businesses have the responsibility of addressing the lack of affordability that they helped created.
“The behavior of the big business lobby groups throughout this whole process has been, frankly, shameful,” Katie Wilson, the Transit Riders Union general secretary, wrote in a statement emailed to Seattle Weekly. “They have offered no solutions. Instead they have poured their vast resources into a PR campaign to discredit the city council in the eyes of the public and spread misinformation about the progressive business tax and the homelessness crisis. They have cynically manipulated many Seattle residents’ legitimate concerns about rising property taxes and the impact of homelessness on their communities, to inflame prejudice and weasel out of making a modest contribution toward real solutions. They have made Seattle an uglier place.”
This story was first published in Seattle Weekly.