Published: Tue, May 15, 2018
Markets | By Josh Butler

Seattle scales back tax in face of Amazon's revolt, but tensions linger

Seattle scales back tax in face of Amazon's revolt, but tensions linger

Starbucks was scathing Tuesday in its criticism of the Seattle City Council, which on Monday unanimously passed a controversial tax on big businesses to help fund affordable housing and fight homelessness.

As passed on a 9-0 vote after a boisterous public hearing, the measure would apply to most companies grossing at least $20 million a year, levying a tax of roughly 14 cents per employee per hour worked within the city - about $275 annually for each worker. Four bill sponsors initially pitched a tax of $500 per full-time employee a year but a compromise proposal emerged over weekend after they couldn't muster the six votes needed to override a potential veto by Mayor Jenny Durkan.

Much of the revenue generated from the tax will be used to build new low-income housing units, as Seattle is in the midst of a housing and homelessness crisis.

"By threatening Seattle over this tax, Amazon is sending a message to all of our cities: we play by our own rules", the letter said.

Even though the company made a decision to resume one of its building projects, Drew Herdener, an Amazon vice president, said in a statement, "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".

The Seattle Chamber of Commerce criticized the tax, calling it an unfair burden on business owners who have already seen the city increase the minimum wage and pass mandated sick and family leave ordinances.

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Head taxes are extremely rare in the US and the ones in place are a fraction of Seattle's proposal.

Amazon, which halted two major expansion projects in Seattle in protest over the larger tax increase, said it was disappointed even with the smaller tax package, although the company said it would restart the planning process for one of its new buildings.

District 3 Councilmember Kshama Sawant had been rallying for a head tax that would raise the full $150 million, but was never able to garner enough support from fellow councilmembers. Representatives of businesses warned that the tax would drive employers out of town, while others speakers questioned whether Seattle's city government could be trusted to spend the additional tax revenue wisely. The Seattle region had the third-highest number of homeless people in the US and saw 169 homeless deaths in 2017. That's per a city councilwoman in Seattle, where local politicians hope a new tax on big business will alleviate homelessness.

"The city does not have a revenue problem - it has a spending efficiency problem", he said. "If they can not provide a warm meal and safe bed to a five-year-old, no one believes they will be able to make housing affordable address or opiate addiction". Those on the smaller end of that scale say they fear they will feel the brunt of it.

Overall, around three percent of Seattle businesses will be hit by the tax, which is set to last for five years. Today, it has workers in more than 40 buildings and occupies one-fifth of Seattle's first-class office space, totaling more than 10 million square feet.

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