In an attempt to address a mounting housing crisis and the skyrocketing cost of living, Seattle city leaders unveiled in May a plan to charge large employers for every employee they have in the city, known as “the head tax.” The tax has been nicknamed the “Amazon tax” because of the economic impact it would have on Amazon, one of the city’s largest employers.
The tax would be applied to about 500 Seattle businesses in total – all of the city’s largest for-private employers. The tax, which would likely be around $500 per a work, would have generated around $75 million a year, which the city council planned to put toward creating more affordable housing and provisioning homeless services in order to deal with the rapidly increasing rental prices and real-estate crisis and growing rates of homelessness.
Washington is one of the seven states in the United States without any income tax. State and city revenues are largely derived from sales tax (currently set at 10.1 percent in Seattle) and property taxes. Champions of the head tax say it will progress an agenda of more equitable taxation in the state. “A progressive tax on businesses most benefiting from this growth is our best option because we already rely heavily upon regressive property and sales taxes that hit everyone equally,” said Seattle city council member Lisa Herbold.
However, not everyone is in favor of the tax. Indeed, the proposed tax prompted ire from diverse sectors of the city. The announcement prompted Amazon, currently the city’s largest employer, to halt construction on a new office tower it was building in the city and begin implementing plans to move another 7,000 jobs from Seattle to other cities in the US.
“Pending the outcome of the head tax vote by City Council, Amazon has paused all construction planning on our Block 18 project in downtown Seattle and is evaluating options to sub-lease all space in our recently leased Rainier Square building,” Amazon vice-president Drew Herdener told the media in an email. Amazon eventually opted to resume construction on the tower but did say it would be considering whether Seattle was the right city for it grow.
Many of the city’s unions and construction groups are also staunchly opposed to the tax on the grounds that it would stifle the city’s construction boom. In early May, union construction workers marched on City Hall to protest the tax.
The tax was formally passed by the Seattle city council on May 14 in spite of the opposition.
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