Six Things to Think About When Thinking About the Head Tax

This story originally appeared in the South Seattle Emerald.

Weeks of tense negotiations, heated yelling sessions, and a high-stakes game of chicken between the biggest employer in the city and the city council culminated in a unanimous city council vote to approve a $275-per-employee “head tax” on Monday afternoon. But what does the vote mean? Is Amazon’s threat to abandon the city off the table? And where does Seattle go from here?

We’ve put together a handy primer to answer these and other pressing questions about this latest effort to address the growing homelessness crisis in Seattle.

1. The $275-per-head tax the council passed Monday was not the tax a majority of the council wanted to pass. Last Friday, in fact, the council’s finance and neighborhoods committee (made up, on this occasion, of all nine council members) approved a much larger tax of $500 per employee, which would have raised around $75 million a year. That vote, however, was too narrow (at 5-4) to withstand a likely veto by Mayor Jenny Durkan, who offered up a $250 version of the tax as a counterproposal last week. The “compromise” most council members agreed to over the weekend raised the total size of the tax by just $25 per employee, enough for Durkan to cheerfully declare victory on Monday evening and for council members who wanted a larger tax, such as council member Mike O’Brien, to say that they had done everything they could.

2. The original $500 tax proposal didn’t come out of nowhere—it was recommended by the city’s Progressive Revenue Task Force, a group that was established after a group of council members failed to pass a smaller, but similar, business tax during the city council’s 2017 budget process. The task force was charged with coming up with a tax that would produce between $25 million and $75 million in revenues; they ended up proposing a $500-per-employee tax on businesses with more than $20 million in gross revenues after considering, and rejecting, lower tax levels that would apply to a larger number of businesses. By targeting the tax at businesses at the very top of the city’s revenue scale, the task force was attempting to respond to objections by smaller businesses (those with more than $5 million but less than $20 million in gross revenues) operate on narrow profit margins and shouldn’t really count as “big businesses.” The more businesses the task force exempted from the tax, the larger the tax had to be to yield the same revenues, which is how the task force arrived at $500

3. The head tax isn’t enough to address the problem. The tax, which sunsets after five years, would raise about $47 million a year for new housing, rental subsidies, and supportive services. Under the spending plan adopted by the council, that would be enough to build about 591 units of housing—288 for low-income people making between 30 and 60 percent of Seattle’s area median income and 303 permanent supportive housing units for formerly homeless people making between 0 and 30 percent of median.  The plan also includes rental subsidies to get homeless people into “immediate housing,” funding for a total of about 250 new shelter beds and authorized encampments, and more money for safe parking lots and sanitation stations.

A few hundred housing units is obviously far from adequate to house the more than 8,500 people who were homeless in Seattle at the beginning of 2017, when All Home did its most recent homeless census—a number that has likely only grown since then. In fact, a report commissioned by the Seattle Metropolitan Chamber of Commerce, by the consulting firm McKinsey & Co., concluded that the county needs an additional 14,000 units of affordable just to address the current needs of people experiencing homelessness in King County. Building that much housing and addressing the other needs of King County’s homeless population would cost the public and private sectors $410 million a year, the independent report concluded, and that’s only if the annual rate of people falling into homelessness does not increase. King County would need to spend between $164 million and $215 million a year to pay its “share” of that $410 million total.

Michael Maddux, a staffer for council member Teresa Mosqueda’s office, crunched the numbers in the report and determined that Seattle’s “share” of that countywide total would be somewhere between $59 million and $79 million. The $47 million in annual spending that the $275 head tax would provide falls short of the bottom end of that range.

4. The tax that passed Monday is just the beginning of the story. Although the national news crews packed up their cameras and left before the council could begin discussing how to spend the new revenues on Monday, the spending plan is in many ways more critical than the size of the tax. The plan Durkan proposed for her $250 tax would have focused the vast majority of its spending on emergency shelter, encampment removals, and other stopgap solutions, rather than housing, building just 250 units of new affordable housing over five years.

On Monday, the council approved a spending plan that took the opposite approach, emphasizing housing over temporary shelter. However, the real debate will come later this year, when Durkan proposes an implementation plan for the tax as part of the city’s annual budget process. (The spending plan adopted this week sets the council’s priorities, but is itself a nonbinding resolution.) That plan, and the budget process, will give proponents of the Durkan spending model another opportunity to attempt to recalibrate the spending balance in the tax proposal.

The city’s adopted Pathways Home plan, which directs the city to focus its homeless service spending on programs that get people off the streets and into “permanent housing” as quickly as possible, recommends that the city do the exact opposite of what Durkan recommended in her original spending plan. Last year, the city adopted a spending plan for homeless service providers that actually eliminated funding for a large number of basic shelter beds, on the grounds that those shelter providers failed to demonstrate that they could move their clients into permanent housing quickly. Pathways Home is controversial, in part, because it penalizes nonprofits that serve the hardest to house, but the “housing first” principles that underlie it are right in line with the McKinsey report that suggested a lack of housing is the fundamental problem underlying Seattle’s homelessness crisis.

5. Seattle has continued to insist that it won’t continue to “go it alone” on funding for homelessness, but King County has yet to step up and propose its own tax plan to supplement Seattle’s. Although Durkan announced Monday that King County will provide $5.7 million in one-time funding to help keep shelters and authorized encampments open in 2018, the county has been noticeably quiet about what it will do to fund housing and services on an ongoing basis. One Table,” a regional task force made up of elected officials, advocates, and business leaders from across King County, began meeting in January. So far, they have announced that Pearl Jam will hold two concerts in Seattle to raise at least $1 million for homelessness—and not much else. The group’s last two public meetings were canceled with minimal public notice, and the closest they have gotten to a set of recommendations is nine-page document, released quietly last month, that includes no cost estimates, no funding proposals, and no timeline for implementing any of the ideas on the list. That document no longer appears to be available on King County’s website.

6. Finally, the passage of the head tax is unlikely to end the vitriol that has accompanied the debate over homelessness in the past few months, exemplified by a recent town hall meeting at a church in Ballard where homeowners shouted down a panel of elected leaders and progressive revenue task force members with bellows of “BULLSHIT!” “FUCK YOU!” and “RESIGN NOW!”  The problem with any spending plan that fails to house enough people to make an appreciable dent in homelessness is that it leaves too many people on the streets, opening the city up to the predictable objection that “no matter how much money we give them, the problem keeps getting worse”  and the problem with any spending plan that takes a large number of people off the streets and stuffs them into new “tiny house” camps and shelters is that those people have nowhere to go and shelter becomes a way of warehousing people indefinitely.

Meanwhile, the problem with spending the amount that experts consider “enough” is that it tends to inspire fierce pushback from the business community. (According to Maddux’s report, a thorough response may require about $69 million per year from Seattle and $120 million from the rest of the county.)  Amazon threatened to stop construction on one of its downtown projects over the original $75 million head tax proposal, and said on Monday that the adopted $47 million tax “causes us to question our growth here” in Seattle. That kind of talk tends to send those who have benefited from the recent Amazon-fueled boom, such as homeowners who have seen the value of their properties skyrocket to an average of $820,000 over the last few years, into a tizzy. Amazon may not leave Seattle, or even slow its growth here—Fast Company, the business magazine, called the company’s latest statement “passive-aggressive and vaguely threatening”—but the possibility that the company, which just reported $1.6 billion in quarterly profits, might retaliate against the city remains a guillotine that the company is more than happy to hold over the heads of those who have benefited from its success.

3 thoughts on “Six Things to Think About When Thinking About the Head Tax

  1. Pingback: Today's Head Tax Defeat Has Lessons for Both Sides | The C Is for crank

  2. Pingback: Head Tax Heads for Repeal. What Happened, and What Happens Now? | The C Is for crank

  3. NO HEAD TAX! Stop enabling out of state addicts. Seattle is awash in record revenue. I don’t know the numbers off the top off my head by the city’s gross revenue has grown massively since 2010 thanks to population, economic, construction, and property value growth. The money is being squandered. Case studies in Seattle fiscal malfeasance abound. Given this fiscal background, I just don’t think its appropriate to raise taxes on employees for a wishy-washy “plan” while continuing to allow drug use and alcohol in some of these camps. We have de-facto legalized low-level heroin and meth, and King County “Health” plans to fund heroin injection sites while stifling voters from a say. We also need background checks in the camps – when you move into an apartment they do a background check, why not for homeless in the tax-payer funded camps? The rape was a perfect case study in why the camps need background checks- if they bothered with background checks the woman wouldn’t have been raped in a bathroom because they would have arrested him for outstanding warrant for breaking into a Magnolia home and liquidating all their possessions while they were on vacation. BTW he was from Texas.

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