Seattle Employee Tax Will Fund Housing for the Homeless

Some large businesses oppose controversial new law

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Seattle Employee Tax Will Fund Housing for the Homeless


[Update: The Seattle City Council repealed the tax on June 12, largely in response to a referendum campaign called No Tax on Jobs that was backed by businesses in the city.]

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mazon and other large businesses in Seattle will soon be hit with an employee tax that will fund housing and provide other services for the city's homeless. Supporters of the new law say that Seattle's wealthiest companies have benefited from the city's growth and should help pay for needed services, but opponents say it will drive business out of Seattle.

The tax is expected to generate around $47 million annually from about 585 businesses that gross at least $20 million a year. 

"We must make urgent progress on our affordability and homelessness crisis," said Mayor Jenny Durkan, who signed the tax ordinance into law. "Looking ahead, I am focused on acting to move people off the street and into safer places, to clean up the garbage and needles that are in our parks and in our communities, and to provide resources to those people experiencing homelessness, including job training, behavioral health services, and other supportive services."

Bryan O'Connor, an attorney with Jackson Lewis in Seattle, said it is a thorny issue that many cities are struggling with. Some affected employers might wonder if it is worth the cost of doing businesses in Seattle, he said. Over the last few years, Seattle employers have had to deal with new laws on predictable scheduling and paid sick leave. All of these things make it more expensive to do businesses in Seattle, O'Connor noted.

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Seattle may be the first city to roll out an employee tax like this, but it will not be the last, said Joseph Schmitt, an attorney with Nilan Johnson Lewis in Minneapolis. San Francisco and Silicon Valley, for example, are also home to many large businesses and struggle with cost-of-living and housing challenges.

Rapid Growth

The Seattle City Council said the tax will help resolve some of the issues caused by the city's rapid growth. "The cost of providing services to a city that has grown by 100,000 people in the last 10 years, in a region that continues to grow by 1,000 people a week, is vastly outpacing our revenue in this booming economy," four council members said in a statement.

Starting as soon as January 2019, covered employers will pay about $275 per full-time employee each year. The tax will end in December 2023, but could be renewed at that time. Three-quarters of the funds will go toward affordable housing and the rest will go to other services for the homeless.

Amazon—the city's largest employer—strongly opposes the tax. The tech giant initially halted its new office construction in the city because of the tax, but has resumed at least some building. "[W]e 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," Amazon Vice President Drew Herdener said in a statement. "The city does not have a revenue problem—it has a spending efficiency problem."

But city council members said their options are limited. "Washington State doesn't tax income or capital gains, and at the city level, we're left with very few options to raise the resources we need," the council members wrote.

What's Next?

Employers should be on the lookout for more guidance on the tax, which the city is expected to issue before the tax is implemented.

Some local businesses are attempting to challenge the tax at the ballot box. The No Tax on Jobs campaign started a citizen referendum to overturn the new law. The coalition must secure more than 17,500 signatures by June 15, O'Connor noted. Even if the referendum does get on the ballot, it's not clear how citizens will vote.

Businesses may also decide to bring a lawsuit challenging the tax's enforceability, but that hasn't happened yet, Schmitt said.

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