AMZN Amazon.com Inc

By Nour Malas 

Seattle is poised to repeal a newly passed per-employee tax on big companies designed to raise funds for homeless services, after fierce opposition from the business community and growing public debate on the move.

The Seattle City Council, which passed the levy unanimously less than a month ago, convened a special meeting Tuesday to vote to repeal it. An anti-tax campaign backed by major companies, including Amazon.com Inc., to put the measure to voters in November had gathered enough signatures -- more than double the number needed -- to move toward a referendum, a campaign spokesman said.

The council moved pre-emptively to repeal the tax to avoid a long and costly political fight, council members said. After initially supporting the measure, Seattle Mayor Jenny Durkan, a Democrat, and seven of the council's nine members said in a statement Monday they supported a vote to weigh repealing it.

"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 Seattle tax passed after months of debate and a last-minute flurry of public protests on both sides of the issue. The tax would, starting next year, levy $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.

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.

A count in January of homeless in King County, where Seattle sits, found more people sleeping outside rather than in shelters than ever before, though the annual rise in the overall number of homeless had slowed from previous years. The count found 12,112 people homeless, a 4% increase from the year before.

Dozens of protesters gathered at Seattle City Hall Tuesday, where the council took the unusual step of opening up its special meeting to public comment before the vote.

Pro-tax protesters raised red signs reading "Tax Amazon" and chanted "We are ready to fight, housing is a human right!" Those opposing the tax, organized into the business-backed campaign called No Tax on Jobs, held green-and-white signs supporting a repeal and thanked the council for its U-turn.

Mr. O'Brien said the antitax campaign had become so heated in the past month 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.

Other council members ready to repeal the tax 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."

Since its passage, the antitax campaign raised more than $280,000 and gathered more than 45,000 signatures to qualify a referendum on the tax for the November ballot, said John Murray, a campaign spokesman. The campaign had planned to submit their petition Tuesday before learning of the council's surprise repeal vote, Mr. Murray said. They now awaited the result of the council vote.

Mr. Murray said the support the antitax campaign was able to gather reflected discontent with the city council's approach to spending in general, and its spending on homelessness in particular. "This is about council accountability," he said.

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.

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

(END) Dow Jones Newswires

June 12, 2018 17:10 ET (21:10 GMT)

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