The Seattle City Council passed legislation on Tuesday to repeal a head tax that would have required local businesses with gross revenue above $20 million to pay $275 annually for every full-time worker in the city as a means to fund its growing homelessness crisis. Seattle Mayor Jenny Durkan is expected to sign the repeal into law.
The council had unanimously passed the measure, dubbed the "Amazon tax," on May 14, but several council members have since changed their tune. Councilmember Kshama Sawant is not among them. On Monday, she tweeted that the repeal is “a capitulation to bullying by Amazon & other big biz.” Along with Teresa Mosqueda, Sawant is one of two councilmembers who maintained their support of the tax and voted against the repeal.
The repeal came quicker than expected. Opponents of the head tax had been collecting signatures for a petition to put a repeal initiative on the ballot this coming November. Amazon, Starbucks and Vulcan, Microsoft co-founder Paul Allen’s company, are among the top five contributors to the anti-head tax campaign, called No Tax on Jobs. The organization had reportedly received more than double the signatures necessary to put a head tax repeal on the ballot, but the City Council vote rendered the initiative moot.
In addition to giants like Amazon and Starbucks, a long list of other businesses also publicly opposed the head tax. Leaders of Seattle-based venture-backed businesses including Rover, RealSelf and Outreach all signed an open letter speaking out against it.
Seattle City Council president Bruce Harrell, who called the special meeting to overturn the head tax, has told media outlets that the repeal isn’t due to the Amazon-backed campaign. He says it’s because of opposition from constituents.
After the head tax passed last month, PitchBook spoke to Madrona Venture Partners managing partner Matt McIlwain, who's been a vocal opponent of the effort. He was hopeful the tax would be overturned but worried about negative implications in the interim.
"We've got companies in our portfolio that are going to have to think long and hard about growing their teams here," McIlwain told PitchBook in May. "I think it will definitely hurt job growth, and it will hurt the folks that are directly involved in the tech world, but also restaurateurs and construction workers and others in the greater ecosystem."
The head tax, reported to be the largest business tax of its kind in the US, has been a divisive issue since it was introduced. Business leaders across the US have been fretting about potential copycat taxes, while others applauded the action taken by Seattle councilmembers. Now that the tax has been overturned, how the city will fund measures to support the growing homeless population remains in question.
"I am encouraged to see Mayor Durkan and the Seattle City Council listening to the voices of the people including grassroots citizens, businesses of all sizes and workers benefiting from our city’s growth," McIlwain told PitchBook on Tuesday. "We all share a responsibility for understanding how the city spends money today, what our top priorities should be and how we are going to efficiently address those priorities over time."
Related reads: Why one VC says Seattle's new head tax is bad for startups