Seattle Needs a Cure for Its Tax Fever

When Amazon announced its search for a second North American headquarters last year, it listed a “stable and consistent business climate” as a top priority. By that standard, its hometown — HQ1 — may be failing the test.

The Seattle City Council recently approved the largest “head tax” in the country — $275 per employee per year that Amazon, Starbucks and more than 500 other big companies will have to pay.

Amid the rancorous Seattle debate, one socialist City Council member led a protest march against Amazon. A workers’ rights group sought criminal charges against the company for threatening to pause work on a building if the council approved a higher head tax of $500 per employee.

What’s driving all of this is the extraordinary disruption of a city that added 114,000 new people in the past seven years and is experiencing the nation’s fastest-rising home prices, putting home ownership out of reach for more and more people. The head-tax revenue is supposed to help Seattle deal with its large homeless population.

The blowback is sizable. A coalition of businesses led by Amazon, Starbucks, grocery stores and others is gathering signatures for a November referendum to revoke the tax. They will get their signatures and, likely, their recall.

Other nearby communities, like Pierce County to the south, are mocking Seattle by offering a $275-per-employee incentive to companies that move there. Amazon recently transferred jobs on a 130-person delivery support team from Seattle to Arizona, a decision supposedly unrelated to the head tax vote.

A Washington state lawmaker wants to revoke Seattle’s ability to pass taxes like the one aimed at big companies. And business writers eager for a new narrative of this often lionized city piled on, wondering, “Is Seattle Doomed?”

No, of course it isn’t, at least not in the short term. The economy will survive and thrive. Several other tech companies have offices here. But the city has sent a lousy message, with longer-term consequences. Note to other tech cities pondering a similar idea, and there are a few in California: Seattle’s head tax has become the headache tax.

After the heated battle, Amazon, usually low key or silent on local politics, issued a statement lambasting “the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”

No one fared well, not the City Council, which is too anti-business for mainstream Seattle; not the mayor, who should have vetoed the plan, and not Amazon, which has been reluctant or late to engage deeply in the community’s biggest problems.

Though the council opted for the lower head tax — Amazon and Mayor Jenny Durkan influenced that part of the debate at least — the vote was unanimous.

“Some subjects of taxation are more elastic or responsive than others,’’ said Jared Walczak, senior policy analyst at the business-friendly Tax Foundation. “The concern here is that some businesses can easily remove jobs to another jurisdiction or, more simply, expand elsewhere.’’

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