To the chagrin of Apple, Starbucks and other major companies based in Seattle, the city’s council approved this week a tax on large corporations to help relieve homelessness in the city.
As reported by NBC News, this new so-called “head tax” will charge companies $275 per full-time employee with the hope of amassing “about $48 million a year to pay for affordable housing and homeless services.”
Furthermore, this tax, which will start being collected in 2019, only applies to about 3 percent of the city’s companies, roughly 600 firms with gross revenue above $20 million. The tax would run for a period of five years and then be reassessed.
Due to a rapidly growing economy and skyrocketing home prices, Seattle’s homeless population has been increasing, making it the US city with the third highest percentage of homeless people among its ranks.
Originally, the proposal brought forth by Seattle council members sought to raise even more funds to ameliorate conditions for the city’s homeless with the “head tax” at $540 per full-time employee.
However, a lack of support from enough councilpersons and a possibility of a veto from Seattle’s mayor led to this reworked version of the levy.
According to The Seattle Times, this new income for the city will be spent as follows: “66 percent…on affordable housing, 32 percent on emergency shelter, trash pickup, raises for service workers and other needs, and 2 percent on administration.”
Amazon & Starbucks Slam Seattle’s Head Tax
Amazon’s vice president Drew Herdener criticized what he referred to as “a tax on jobs” and asserted that the Internet giant is “apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”
Herdener also said the city of Seattle does not necessarily lack the revenue required but instead “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,” he added.
Amazon would be the hardest hit by this tax as it currently employs close to 450 thousand people in Seattle. This tax also comes at a time when the Internet retail giant is tendering offers from dozens of other cities across the US to set up a second major office.
Starbucks also voiced their anger at this new tax.
Starbucks senior vice president John Kelley said, “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,” Kelley concluded.
As reported by Wired, Starbucks and Amazon were not alone in countering this new tax: “More than 100 Seattle based companies, including tech companies like Expedia, Chef Software, and Tableau, signed a letter urging the city council to reject the tax, arguing that it will punish businesses for creating jobs.”
Seattle’s Head Tax Raises Plenty of Questions
Council member Teresa Mosqueda, who originally backed the larger “head tax,” ultimately accepted the proposal as “a down payment” for what’s needed in terms of infrastructure.
Mosqueda said about Seattle’s situation and the need for more revenue: “People are dying on the doorsteps of prosperity. This is the richest city in the state and in a state that has the most regressive tax system in the country.”
CNNMoney’s Dylan Byers, however, raises a valid point, referring to the end result of this fracas as “a lose-lose for everyone.”
Dylan writes, “Seattle Mayor Jenny Durkan could have brought the City Council together with Amazon, Starbucks and other businesses to hash out a plan that made sense for both sides. Seattle and Amazon could have then trumpeted their success as a model for how liberal cities and tech companies plan to deal with the homeless epidemic they’ve helped to create.”
This push by the city of Seattle raises several interesting questions:
1. Do large, multi-millionaire companies have a social obligation to the city they are headquartered in?
2. Could these sorts of “head taxes” potentially drive large companies away from a city?
3. Is it “ethical” for a city to solely target some companies and not all of them?