AMZN Amazon.com Inc

By Nour Malas 

Seattle is poised to repeal a newly passed tax on each big company's employee designed to raise funds for homeless services, after fierce opposition from the business community.

The Seattle City Council, which passed the levy less than a month ago, will convene a special meeting later Tuesday to vote to repeal it. The move comes after a campaign backed by major companies that opposed it, including Amazon.com Inc., to put the measure to voters in November gained momentum in recent weeks.

The tax would go into effect next year.

After initially supporting the measure, which passed unanimously in May, Seattle Mayor Jenny Durkan and seven of the council's nine members said in a statement Monday they now backed a vote on repealing it. They said a long and costly political fight would be counterproductive to working toward sheltering and helping the homeless.

"We ended up with a very divided community," said councilman Mike O'Brien, who helped push through the tax proposal but was now ready to repeal it. "We reached a consensus that the best path for us is to pull this back ourselves, rather than fight."

The about-face shows how severely the tax debate polarized Seattle, pitting some politicians and city residents against big employers like Amazon, Starbucks Corp. and Nordstrom Inc.

It also reflects the depth of divisions about how best to deal with growing homelessness in West Coast cities where wealth, spurred by technology companies and other fast-growing businesses, has raised the cost of living, pushing more people into poverty and homelessness.

Among councilmembers ready to repeal the tax, some characterized it as caving to business interests but said they had no better options. Councilmember Lorena González, who signed the statement on the repeal, criticized the business community for "choosing to double-down on polarizing the issue of homelessness and fostering divide amongst Seattle residents."

"I regret that it appears that powerful and well-resourced interests have swayed public opinion to believe that more is not needed," she said.

The Seattle tax passed after months of debate and a last-minute flurry of public protests on both sides of the issue. The tax would have levied $275 per employee on companies with more than $20 million in annual revenue, or about 3% of Seattle-based businesses, according to the City Council. It was projected to raise about $47 million a year, to be spent on affordable-housing and homeless services.

That version passed after pressure from the business community reduced what had been a proposed $500-per-employee tax.

Some taxpayers backed the idea that companies in Seattle should help pay for homeless services, given that Washington's lack of a state income tax helps them draw and retain workers. Others rejected the tax as prohibitive to business growth.

In a rare public stance on a political issue, Amazon -- Seattle's biggest employer -- slammed the tax and momentarily threatened to stop its expansion in the city to protest it. After the reduced tax passed, the company said it would resume all construction as planned but still criticized the tax and said the city's approach forced companies to reconsider their future there.

A spokesman for Amazon said the company had no new comment on the repeal effort.

Since passage of the tax, a campaign backed by a range of Seattle businesses called No Tax on Jobs raised more than $200,000 and hit the streets gathering signatures to qualify a referendum on the tax for the November ballot.

The campaign was due to submit its signatures this week, Councilmember O'Brien said, and with enough to qualify a referendum, the City Council decided to repeal the tax itself.

Mr. O'Brien said the antitax campaign had become so heated that neighbors turned on one another and people were getting into shoving matches at the grocery store. The council didn't yet have alternate proposals on homelessness, and he said he wasn't sure what the next steps would be.

Write to Nour Malas at nour.malas@wsj.com

(END) Dow Jones Newswires

June 12, 2018 14:52 ET (18:52 GMT)

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