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Seattle repeals new tax after pressure from big businesses

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Capital Markets View – January 2021


Seattle repeals new tax after pressure from big businesses

The Seattle City Council has voted to repeal a newly enacted per-employee tax on the city's biggest companies, which include Amazon.com Inc. and Starbucks Corp., Reuters reported June 12.

The council voted 7 to 2 to repeal the so-called head tax, which was designed to help combat homelessness in the city, the report said. It would have charged Seattle's largest companies a tax of about 14 cents per hour, per employee, to raise $45 million over five years.

This comes shortly after the council said it was going to consider repealing the tax in the face of a "prolonged, expensive political fight" with the targeted businesses.

In May, some of the biggest Seattle-based companies, including Amazon and Starbucks, criticized the law, while more than 100 local businesses signed an open letter opposing it. Also that month, Amazon and Starbucks joined other companies vowing to fund a campaign to push for a referendum to repeal the tax. More than $280,000 was raised for that campaign, called No Tax on Jobs.

The business community had also collected nearly 46,000 voter signatures on a repeal petition, more than enough to qualify an initiative for the November election ballot, Reuters reported, citing the Downtown Seattle Association, which led the effort.

Amazon on June 12 tweeted a statement by company vice president Drew Herdener, who applauded the repeal vote and called it "the right decision for the region's economic prosperity." He added that Amazon is "deeply committed to being part of the solution to end homelessness in Seattle and will continue to invest in local nonprofits" that are working with the issue.

In a statement emailed to S&P Global Market Intelligence, John Kelly, senior vice president of public affairs at Starbucks, said the company welcomed the council's decision. "We believe the best path forward is to implement the reforms recommended two years ago by the city's own homelessness expert," he said.

During the council's meeting on the repeal, Seattle City Councilwoman Kshama Sawant, who voted against the move, called it a "cowardly betrayal of the needs of the working people," Reuters reported. Meanwhile, Councilwoman Lisa Herbold said she was voting for repeal because a political fight was "not winnable at this particular time" for the city.