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June 12, 2018; Seattle Weekly and New York Times

On May 16th, Seattle Mayor Jenny A. Durkan signed into law a $275-per-employee tax on large businesses, after the City Council passed the measure on a 9–0 vote. This Tuesday, however, Seattle’s City Council voted 7–2 vote to repeal the tax. Melissa Hellman in the Seattle City Weekly writes that the seven city council members who reversed their vote were still “eager to arrive at another solution that brought businesses, governmental entities and organizations that supported the homeless to the table”—whatever that may be. “Speakers who opposed the repeal, on the other hand, accused the politicians of capitulating to big businesses.”

Hellman adds that, “Tuesday’s vote now casts uncertainty on the whereabouts of additional funding sources as politicians retreat to the drawing board.”

This turnabout, to use a technical and somewhat ableist term, is crazy.

Economically, the tax, had it been implemented (it was scheduled to take effect in January 2019 and sunset at the end of 2023), would have raised $47 million a year—a modest 3.5-percent increase to general fund revenues—to support affordable housing and reduce homelessness. The effect on business was expected to be negligible. A headline in the Puget Sound Business Journal read, “Ratings agencies say head tax won’t slow Seattle’s economy.” As reporter Imran Ghori of Bond Buyer explains in more detail:

As Seattle prepares to implement a new “head tax” on large employers to pay for homeless services, the city’s credit strength remains unchanged, according to two major ratings agencies. Moody’s Investors Service called the $275-per-employee tax “a credit positive for the city,” in a May 23 report. Fitch Ratings stated in a May 18 report that it expects any impact “to the city’s strong economic growth as a result of the new tax to be limited.”

And the need for resources to fight homelessness is not in doubt. Seattle is only the nation’s twentieth largest city by population, but “The city’s homeless population,” note David Streitfeld and Claire Ballentine in the New York Times, “is the third largest in the country, after New York and Los Angeles.” Put another way, in 2014, Chicago was home to over 2.7 million people—more than four times as many as Seattle—yet Seattle has more homeless than Chicago.

Another marker is lives lost. According to the King County medical examiner, 697 homeless people have died on the streets of Seattle since 2012. Hellman adds that King County’s ‘latest annual point-in-time count released in May revealed that 12,112 people are experiencing homelessness,” up four percent from last year .

Outside the city, Seattle quickly spawned imitators. Streitfeld and Ballentine note that, “California cities like Cupertino, East Palo Alto, Mountain View, and San Francisco have recently explored various forms of a head tax.” Forestalling that—more than the modest impact of the tax—might have motivated business opposition.

In any case, Seattle businesses successfully mounted a petition drive. And seven of nine City Council members, rather than welcoming the opportunity to campaign and defeat the referendum, decided to fold instead.

It is worth noting that this capitulation was a purely Democratic Party affair. At present, the City Council has eight Democrats and one socialist, Kshama Sawant, who was one of two city council members to vote to hold the line on Tuesday. An article in the Post-Intelligencer in 2016 notes that “the last Republican legislator in a Seattle district lost her seat in 1982.”

Homeless advocates, reports Hellman, are upset at the Council’s turnabout. “I’m going to be honest: I’m angry,” says Emerson Johnson. “What the city is doing is what they have always done, putting profit over people. That’s why we have a housing crisis and the most regressive tax structure in the nation.” Hellman notes that, “An April Economic Opportunity Institute report showed that Seattle has the most regressive tax system in Washington, meaning that the poorest residents pay higher tax rates than the wealthy. A 2015 Institute on Taxation and Economic Policy report also indicated that Washington’s tax system was the most regressive in the country because of its heavy reliance on sales taxes.”

Many questions remain. Why have allegedly socially conscious capitalist companies like Starbucks and Amazon and philanthropists like Paul Allen led the charge to defeat a tax that would address homelessness? And what are we to think of a McKinsey & Company study commissioned by the local Chamber of Commerce, a tax opponent, that indicated that $360 million—far more than the $47 million tax—is needed to address homelessness in metro Seattle?

How Seattle homeless advocates respond remains to be seen. According to the City Clerk’s website, an initiative that gets 22,040 valid signatures would qualify for the ballot. Might Amazon’s petition tactic come back to bite it?—Steve Dubb