business news in context, analysis with attitude

As reported on MNB yesterday, the Seattle City Council has voted to impose a new tax on for-profit companies that gross at least $20 million a year in the city - a “head tax” of $275 per employee, per year, which the city says will be used to address Seattle’s homeless problem.

We took note of the Seattle Times report that roughly three percent of the city’s businesses will be impacted by the head tax, which will raise about $47 million a year. More than 20 percent of that tax revenue will come from one company, Amazon, which is said to be facing a head tax bill of about $10 million a year.

There was some company reaction yesterday.

From Starbucks:

"This City continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside. If they cannot provide a warm meal and safe bed to a five year-old child, no one believes they will be able to make housing affordable or address opiate addiction. This City pays more attention to the desires of the owners of illegally parked RVs than families seeking emergency shelter.” - John Kelly, senior vice president, Global Public Affairs & Social Impact at Starbucks.

From Amazon (which had stopped construction on one of its new Seattle buildings pending the vote, which originally was going to be on a head tax almost twice as high):

“We are disappointed by today’s City Council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here. City of Seattle revenues have grown dramatically from $2.8B in 2010 to $4.2B in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem – it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better.” - Drew Herdener, Vice President, Global Corporate and Operations Communications, Amazon.
KC's View:
A friend of mine in Seattle, Brad Halverson, sent me a note that I thought did a good job putting the tax’s impact into a larger context, pointing out that it affects “nearly 600 growing businesses which must give $50 million/year more on top of the $63 million/year the city is already spending to address homelessness. This tax is based on annual gross revenues (not net profit). And it will include at least a dozen food/grocery store operators in the city limits.

“Many MNB readers who’ve visited Seattle already know and admire many of these local food retailers for their innovation and can appreciate how modest grocery profits are invested back into store remodels, for job creation and risk taking in hopes of increasing sales which….well…increase consumer spending and generate more tax revenue back to the city.

“And yet an extreme faction in the Seattle City Council believe businesses are to blame for worsening homelessness and housing prices. This while these very same elected leaders will not provide any evidence of improvement from their existing spending efforts to fix local homelessness, illegal camping in parks, drug dealing or clean-up of the growing trash heaps.

“It’s a tone-deaf slap to many of these grocers who have given generously to their communities for many years, especially to those in need, to organizations like Mary’s Place, Fare Start and local Food Banks. It’s really more like a job killing tax.

“Companies will think carefully about operating here with such erratic and anti-business city leaders.”