SEATTLE — Seattle leaders on Tuesday repealed a tax on large companies such as Amazon and Starbucks after a backlash from businesses, a stark reversal from a month ago when the City Council unanimously approved the effort to combat a growing homelessness crisis.
A divided crowd chanted, jeered and booed at the council meeting, drowning out the leaders as they cast their 7-2 vote. Many shouted, “Stop the repeal,” as others unfurled a large red banner that read, “Tax Amazon.” An opposing group held “No tax on jobs” signs.
The vote showed Amazon’s ability to aggressively push back on government taxes, especially in its affluent hometown where it’s the largest employer with more than 45,000 workers and where some have criticized it for helping cultivate a widening income gap that is pricing lower-income workers out of housing.
The tax was proposed as a progressive revenue source aimed at tackling one of the nation’s highest homelessness numbers, a problem that hasn’t eased even as city spending on the issue grew.
Businesses and residents demanded more accountability in how Seattle funds homelessness and housing and said the city should take a regional approach to the problem. Many worried that Amazon and others would leave the city as the companies sharply criticized the tax as misguided.
The online retailer even temporarily halted construction planning on a new high-rise building near its Seattle headquarters in protest. Amazon called the vote “the right decision for the region’s economic prosperity.”
The company is “deeply committed to being part of the solution to end homelessness in Seattle,” Drew Herdener, an Amazon vice president, said in a statement.
City leaders underestimated the frustration and anger from residents, businesses and others over not just a tax increase but also a growing sense that homelessness appears to have gotten worse, not better, despite the city already spending millions to fight it.
Seattle spent $68 million on homelessness last year and plans to spend even more this year, not counting the tax that would have raised roughly $48 million annually.
But a one-night count in January found more than 12,000 homeless people in the Seattle and surrounding region, a 4 percent increase from the previous year. The region saw 169 homeless deaths last year.
Many supporters called the repeal a betrayal and said the tax was a step toward building badly needed affordable housing. They said too many people are suffering on the streets and that the problem is deepening, despite city-funded programs finding homes for 3,400 people last year.
Proponents jeered and booed council members, imploring them to keep the tax and fight a coalition of businesses trying to get a referendum overturning the tax on the November ballot. Council President Bruce Harrell repeatedly told the crowd that he would move the meeting elsewhere if people kept being disruptive.
Several members, including three who sponsored the legislation but voted to repeal it, lamented the reversal and conceded they didn’t have the resources or time to fight the referendum.
Councilwoman Lisa Herbold said it “was truly our best option” and that she repealed it with a heavy heart.
“Gutless!” someone shouted as she explained her rationale. She and others said they didn’t want to spend the next several months in a political fight that would do nothing to address urgent homelessness problems.
Denise Moriguchi, chief financial officer at Asian grocery store chain Uwajimaya, told the council that she doesn’t like seeing people living in tents but that the tax was not the answer. She said small businesses with thinner margins than Amazon would be hurt.
Seattle’s so-called head tax would have charged companies about $275 per full-time worker each year for affordable housing and homeless services. It targeted nearly 600 businesses making at least $20 million in gross revenue and would have taken effect next year.
Jeff Shulman, an associate professor in the University of Washington’s Foster School of Business, said the way the tax got pushed through is the antithesis of the collaborative spirit the city is known for.
“It kind of set up larger businesses as the enemy, and in reality, the city is going to need them as allies and partners,” he said.
Days after it passed, business-backed the No Tax On Jobs campaign began gathering signatures for the ballot and raised more than $280,000 in cash contributions in just weeks.
“They’ve made clear they have the resources to bankroll many more months of nastiness,” pro-tax group Working Washington said in a statement.
John Kelly, Starbucks vice president of public affairs, said the company welcomes the move and believes the best path forward is to follow reforms recommended two years ago by city’s homelessness expert.
It marks the latest Amazon fight against government taxes.
The company recently said it would block Australians from purchases on its international websites after the nation planned to impose a 10 percent consumption tax on online retailers for goods shipped to Australia.
