Seattle to reverse and repeal new head tax after Amazon pressures city leaders

Seattle city officials have committed to reversing a new tax on big businesses that garnered unanimous approval from the city council just a few weeks ago, The Hill reported.

Amazon and some of the city's other largest employers, including Starbucks, quickly raised $200,000 to gather signatures for a referendum that would challenge the council's decision. They planned to submit the signatures Tuesday in hopes of getting it placed on the November ballot.

But late Monday, Mayor Jenny Durkan and City Council President Bruce Harrell, who decided on the reversal over the weekend, issued statements signaling the reversal and repeal of the "head tax" that the Seattle City Council approved 9-0 last month.

“We heard you,” Durkan, along with seven of the nine City Council members, said in a statement. “This week, the City Council is moving forward with the consideration of legislation to repeal the current tax on large businesses to address the homelessness crisis.”

How much was the head tax?

The head tax would have imposed a $275 per employee on businesses that bring in $20 million or more annually, affecting about 3 percent or 585 of the city's companies. It was expected to raise $47 million in revenue.

Revenue generated from the tax was intended to help combat the city's homeless problem.

What did Amazon do?

Amazon opposed the tax.

The company, which employs 45,000 workers in Seattle, placed a hold on projects that would have created 7,000 new jobs in the city. It also started looking at options to sublease office space downtown.

What do city council members say about the reversal?

Council member Lorena Gonzalez said she was "deeply troubled and disappointed by the political tactics" used by some of the powerful companies that "seem to prioritize corporations over people."

“It was my sound belief that a compromise on this policy had been reached with business, and as an elected official representing all of Seattle, I am deeply disappointed that certain members of the business community did not engage in good faith with the City of Seattle,” Gonzalez told The Hill in a statement.

Council member Kshama Sawant called the decision a “backroom betrayal.”

What do experts say about the pressure Amazon placed on city leaders?

Amazon has 20 cities on its shortlist of places to build its new massive headquarters.

And many have offered the internet giant billions in incentives to choose their city for the HQ2 project that would bring about 50,000 jobs to the winning region.

Some experts believe the finalists vying for HQ2 should take note of Amazon's behavior.

“I think this is problematic enough and Amazon has shown enough troubling behavior that I would drop out” of the running for HQ2, Richard Florida, an urban expert at the University of Toronto’s Martin Prosperity Institute, told The Hill. “If you’re smart, you certainly wouldn’t offer incentives to a company that’s going to squeeze you."

What else?

The Seattle Metro Chamber of Commerce conducted a study that found the tax would have led to the loss of 14,300 jobs and more than $3 billion in economic output, The Hill reported.  The council expected the head tax to raise $47 million in revenue.