Amazon, Starbucks blast Seattle City Council's approval of head tax compromise

The Seattle City Council approved a compromise head tax on Monday. May 14, 2018. (Photo: KOMO News)

SEATTLE – The Seattle City Council on Monday approved a controversial but compromise head tax on large businesses to pay for programs for the homeless.

The tax would raise about $48 million a year – less than the original proposal of $75 million but more than the $40 million that Mayor Jenny Durkan had proposed.

"This was a tough debate. Not just here at City Hall, but all across this city," Durkan said at a news conference Monday evening. "No one is saying that this will solve everything, but it will make a meaningful difference."

WATCH: Seattle Mayor Jenny Durkan reacts to head tax passed by city council:

“This legislation will help us address our homelessness crisis without jeopardizing critical jobs. Because this ordinance represents a true shared solution, and because it lifts up those who have been left behind while also ensuring accountability and transparency, I plan to sign this legislation into law," Mayor Durkan said.

Amazon, downtown Seattle's economic giant, immediately blasted the proposal in what it said was a, "hostile approach to larger businesses that forces us to question our grown here."

Drew Herdener, an Amazon vice president, released this statement:

“We are disappointed by today’s City Council decision to introduce a tax on jobs. 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. City of Seattle revenues have grown dramatically from $2.8 billion in 2010 to $4.2 billion in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. 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.”

Earlier this month, Amazon paused two large construction projects in the city, until a decision on the tax was made.

Starbucks also slammed the new tax and questioned the city's accountability.

"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," John Kelley, Senior vice president for Starbucks Global Public Affairs and Social Impact said in a statement to KOMO News on Monday evening.

The Seattle Chamber of Commerce raised concerns as well.

"Taxing jobs will not fix our region's housing and homelessness problems," Seattle Metropolitan Chamber of Commerce President and CEO Marilyn Strickland said in a statement. "If the Seattle City Council is serious about addressing these challenges, I hope we can count on their leadership on two critical issues: the HALA upzones, which address our outdated zoning, and aligning our fragmented homelessness services system.”

Strickland did thank Durkan for her leadership in a, "challenging, politicized environment."

The new, approved tax proposal will:

  • Tax large businesses about $275 per employee, per year for companies making more than $20 million.
  • Raise about $48 million a year for homeless services and affordable housing.
  • Begin Jan. 1, 2019 and expire in five years.
  • Exclude a payroll tax transition.

About two-thirds of the money collected will be spent on new housing. That includes nearly 600 affordable units. Another 300 will be staffed with permanent case worker support.

The rest of the money will be spent on more immediate needs including: rental subsidies for 300 units, 250 shelter beds and services to collect 570,000 pounds of garbage.

"What we're running out of right now in this city is patience," said Councilmember Teresa Mosqueda

"I think it was a job well done and now we have to actually prove to the public that we're actually investing wisely and strategically," said Council President Bruce Harrell.

The tax passed in an 8-1 vote on an amendment, but several councilmembers said they believed a higher tax was needed. They said the higher tax would have faced a veto by Durkan. But Durkan and council members worked on a compromise over the weekend.

Only Councilmember Kshama Sawant voted against the amendment, but then later voted yes on the final proposal.

"This tax is not just about taxing big business. It is about the soul of our city itself," said Sawant.

The new tax is already facing pushback in Olympia.

Republican State Sen. Mark Schoesler said he's ready to introduce a bill to repeal the tax.

"We sent a message from our state's largest city and largest county that we're going to have punitive taxes on job creators. That reflects poorly on my members in King County and our state as a whole," Sen. Schoesler told KOMO News on Monday night.

His legislation would ban a city from imposing a tax that's measured by employee wages, hours or the number of workers - which would include Seattle's business tax, since it would be retroactive to January of this year.

There was a loud public hearing before the vote. Many people chanted and yelled for the council to maintain the larger tax and booed people who spoke against the tax.

The vote came after weeks of heated hearings and divided public meetings.

The debate over who should pay to solve a housing crisis exacerbated by Seattle's rapid economic growth comes amid skyrocketing rents and rising homelessness. The Seattle region had the third-highest number of homeless people in the U.S. and saw 169 homeless deaths in 2017, The Associated Press reported.

The compromise approved Monday would be less than what the committee approved by a 5-4 vote on Friday. That proposal would have taxed businesses with more than $20 in gross revenues $500 a year per full-time worker.

Last week executives from 100 area businesses including Alaska Airlines and Expedia, came out against the tax.

The Downtown Seattle Associated applauded Durkan's efforts to lower the tax but said, "a tax on jobs at any level is bad economic policy and will negatively impact Seattle’s economy and city tax revenues."

Another business group, the Washington Technology Industry Association, was also critical of the tax.

“This compromise might make the council feel good, but it doesn’t address our root concern. There is no accountability for the current expenditure on homeless services. As a result, there is no clear rationale why investing $50 million more in shelter housing is better than $50 million in medical services — or any other service for that matter," the association's president, Michael Schutzler, said in a statment.

POLL: Will the $48 million head tax make a notable difference in the Seattle homeless crisis? Answer the poll below or click here.

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