“Head Tax” Passage Will Resonate Beyond Seattle

Amazon hometown Seattle has enacted a “head tax” on the city’s major businesses in order to pay for homeless aid programs. In effect over a five-year period starting Jan 1. 2019, the new tax will apply to all Seattle businesses grossing more than $20 million per year, at a rate of $0.14 per hour, or about $275 per year per employee.

The Seattle Times reported that Amazon initially put a hold on plans to build an additional office tower, because of the per-employee tax of $500 that was originally proposed. After the scaled-back tax was enacted, Amazon said it would resume planning on the project, but warned in a statement, “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.”

And the e-tailing giant wasn’t alone in its opposition. Earlier this month, more than 100 business leaders signed an open letter opposing the tax, and calling on lawmakers to devise another solution.

“This is like telling a classroom that the students who do the most homework will be singled out for detention,” the business leaders wrote. Instead, they advocated “tax revenue increases based on an optimal mix of taxes, a prioritized spending plan to address both housing and infrastructure, as well as new zoning and related policies to reduce the costs of housing and construction.”

In contrast to the Las Vegas slogan, what happens in Seattle doesn’t necessarily stay in Seattle. Speculation that enactment of the “head tax” could influence large employers to relocate outside of the city limits has reportedly been in the air for some time.

Mayor John Chelminiak of neighboring Bellevue, WA would roll out the welcome mat to any such employer. However, in an interview with GeekWire, he said the tax issue was not the only consideration prompting location decisions.

“Businesses make their decisions on where to locate based on lots of different data points,” he said. “One of those is the tax system, but they make that decision based on a number of different data points. From my perspective, if there is someone who wants to move within the region, our doors are certainly open to them in Bellevue, but … we want to make sure that we show that the Puget Sound region has a really strong economic climate.”

Communities in the Seattle metro area might not be the only beneficiaries of corporate pushback against the city’s new tax. Writing in Fortune.com, author and tax-reform advocate Travis H. Brown warned, “It may not be long until these tech companies pack their bags and move south for a city like Las Vegas, which boasts the second-largest wealth growth of any MSA since 1992, gaining $1,048 of income per minute thanks to its zero-income tax policy.”

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