Seattle Passes Big-Business ‘Head Tax’ to Finance Affordable Housing

Starting next year, large businesses will pay $275 per employee per year.

A homeless camp in Seattle. 

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In a unanimous decision, Seattle’s city council has voted to tax large businesses to help address the city’s homelessness crisis.

Starting next year, for-profit companies that gross $20 million or more will pay $275 per employee, the Seattle Times reports. The tax is expected to raise $47 million per year, monies earmarked for building affordable housing and funding emergency shelters.

“We have community members who are dying,” Council Member Teresa Mosqueda said before the 9-0 vote, the Times reports. “They are dying on our streets today because there is not enough shelter.”

The tax was vehemently protested by Amazon (which could pay up to $10 million per year), Starbucks, and other large Seattle companies. It is a compromise down from the originally proposed “head tax” of $500 per employee, favored by Council Member Kshama Sawant and others. Mayor Jenny Durkan had said she would veto the proposal for the higher amount.

During the head tax negotiations, Amazon paused work on an office tower that was supposed to house 7,000 new Amazon employees. (Adding those employees would cost the company, which reported a net income of $1.6 billion in its most recent quarterly earnings report, about $1.9 million a year.) After the head tax vote yesterday, Amazon said it would resume work on the office tower, but might sublease it to other companies rather than occupying it itself.

“We are disappointed by today’s City Council decision to introduce a tax on jobs,” spokesman Drew Herdener said in a statement, printed in part by the Seattle Times.

“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.”

Washington State has no income tax, which is enshrined in state law. (An attempt to tax the rich in Seattle was struck down by a King County Superior Court judge last year.) As such, the state has the most regressive tax system in the country, with low-income residents paying a larger share of their income than wealthier residents. As Next City has reported in the past, Seattle is the only city in the country to have one of the top five highest tax burdens for people earning $25,000 or less while also having one of the lowest tax burdens for people earning more than $150,000.

Seattle-King County also has the country’s third-largest homeless population. Last year, the Times reported, one in 16 Seattle public-school students was found to be homeless, and another count recorded 11,600 homeless people in the county. The city declared a homelessness state of emergency in 2015.

The housing crisis is exacerbated by soaring apartment rents, which have risen 57 percent in the past six years, and high home prices (the median home price in Seattle is around $720,000). The city’s Housing Affordability and Livability Agenda says Seattle needs to add 50,000 housing units over the next decade, 20,000 of which should be affordable.

In late December 2017, the city promised $100 million toward affordable housing, funded by bonds, the city’s incentive zoning program, and the city’s $290-million housing levy, which voters approved in 2016. The new tax could help build another 591 units of low-income housing over five years.

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Rachel Kaufman is Next City's senior editor, responsible for our daily journalism. She was a longtime Next City freelance writer and editor before coming on staff full-time. She has covered transportation, sustainability, science and tech. Her writing has appeared in Inc., National Geographic News, Scientific American and other outlets.

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Tags: affordable housing

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