Less than a month after approving a “head tax” on Seattle’s largest employers, the city council repealed the plan Tuesday as they faced a backlash from businesses including Amazon.

The tax – charging companies making more than $20 million a year $275 per employee – was intended to provide funds for programs to reduce homelessness in the city. It would have raised $47 million annually starting in January, expiring at the end of 2023.

Seattle, Washington
Seattle's city council reversed course and repealed a "head tax" on large employers. Tonya Chin

The city’s two largest companies – Amazon and Starbucks – blasted the plan and the Seattle Metropolitan Chamber of Commerce began a signature drive for a voter referendum to repeal the tax in November.

Amazon released a statement from company vice president Drew Herdener that said “the vote by the Seattle City Council to repeal the tax on job creation is the right decision for the region’s economic prosperity.”

Before the meeting, Mayor Jenny Durkan and seven members of the city council released a joint statement saying they had called the repeal vote because they were concerned about a divisive fight over the plan. They said they would continue to look for ways to meet the city's housing needs.

“It is clear that the ordinance will lead to a prolonged, expensive political fight over the next five months that will do nothing to tackle our urgent housing and homelessness crisis,” they said.

At a special council meeting where they voted 7-2 to repeal the ordinance, council members said they did so with reluctance. They said they had worked on the proposal for nine months and had made compromises, reducing it from an original tax of $500 per employee.

Councilmember Lisa Herbold said she believed the plan was well-crafted and would not hurt businesses, affecting only 2.5% of those operating in the city. But she and others said business interests had convinced many voters otherwise.

“This is not a winnable battle at this particular time with this particular measure,” she said. “The opposition has unlimited resources.”

Councilmember Kshama Sawant, who voted no, accused her colleagues of “capitulation.”

“This is a cowardly betrayal of the needs of working people,” she said.

In a report last month, Moody’s Investors Service described the tax as a credit positive for Seattle but also noted how a significant employer like Amazon can influence the legislative process.

With about 40,000 employees, Amazon would have had to pay $11 million in 2019 under the tax, according to the report.

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