The Seattle City Council’s passage of a “head tax” upon large employers represents a victory of ideology over sensibility. But it is neither the panacea nor the disaster that pundits on both sides are claiming.
On Monday, the council approved a $275-per-employee tax upon all Seattle businesses with at least $20 million in annual revenue, an issue that has drawn national attention as Amazon and other large employers have mounted opposition. In the wake of its passage, The Seattle Times has editorially called for the tax to be overturned through citizen initiative and for councilors to be voted out of office, and Senate Republican leader Mark Schoesler has claimed that the tax violates the state constitution.
It is possible Seattle’s head tax will be overturned by the public or the courts before it takes effect in 2019. In the meantime, the philosophy behind it warrants discussion. It also warrants mention that Vancouver has a $90 fee for each full-time-equivalent employee (up to 400 FTEs) as part of the annual cost for a business license. That fee increased from $80 per head last year; for a company with 150 employees, it now amounts to $13,500 a year.
Vancouver, of course, is not Seattle, which has undergone extraordinary growth in terms of jobs, construction and population in recent years. Amazon has fueled much of that, with the company occupying more than 13 million square feet of office space as of late last year — enough to fill the Empire State Building five times. An August 2017 headline in The Seattle Times declared, “Thanks to Amazon, Seattle is now America’s biggest company town,” with the article reporting that the company occupies more space than the next 40 employers combined.
Critics have blamed that growth for contributing to Seattle’s homeless crisis, with well-paid tech employees leading to sharp increases in rental and home costs that have priced low-income residents out of the market. The new tax is designed to raise money for promoting affordable housing and homeless services, but it ignores the fact that the issue pre-dates Amazon’s growth spurt. As The Seattle Times wrote editorially: “A 2016 study found (the city’s) homeless programs suffer more from weak management and lax contracts than funding shortfalls.”
Therein lies the lesson for other cities dealing with growing homelessness. Targeting successful companies that provide good jobs, boost the local economy, drive commerce, contribute property and other taxes, support vendor companies, raise the profile of the region, and attract an educated workforce amounts to an attempt to kill the goose that lays the golden eggs. It sends a message that Seattle — and therefore all of Washington — is not welcoming to companies that are too successful. Push hard enough and those companies go elsewhere.
Corporate leaders often are quick to declare that any tax is a “job-killer.” It is a disingenuous trope that led Congress last year to approve huge tax breaks for companies — tax breaks that have led to stock buybacks benefiting stockholders and few others. That was a hollow action designed to appease one end of the political spectrum; Seattle’s tax is a counteraction on the other side of the spectrum.
Along the way, the Seattle City Council has succumbed to progressive politics at the expense of effective management while inviting almost universal derision. That should serve as a cautionary tale for other governments, but it should not imply that the head tax will solve Seattle’s problems nor destroy the city’s economy.
