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Seattle's head tax got chopped. Now what?

It was called a head tax, but maybe it should have been called the Robin Hood tax.

It would have taxed Seattle’s business behemoths — including Amazon, Vulcan and Starbucks — and used that money to house the homeless.

But the tax on Tuesday died in a bed of bad puns: Off with its head and on the chopping block.

At a Seattle City Council meeting, over chanting and shouts from the crowd, seven defeated-looking councilmembers — Sally Bagshaw, Bruce Harrell, Rob Johnson, Lisa Herbold, Mike O'Brien, Lorena González, and Debora Juarez — voted against the so-called "head tax."

Just two councilmembers held fast to the proposal – Teresa Mosqueda, newly elected last fall, and Socialist Kshama Sawant.

"This is not just a stunning betrayal by politicians and a kowtowing to big business," Sawant said at a rally held before the vote. "It is also a kowtowing to corporate politicians like Jenny Durkan."

Mosqueda said she would not vote to repeal the ordinance without a replacement revenue source for homelessness funding.

A frustrated Councilmember Lorena González, speaking over shouts from head tax supporters in council chambers, said she believed the head tax was good policy, but that money behind the repeal effort sunk the legislation.

"We will continue on this City Council to fight for solutions that make sense, that will not tear the city apart, and save the lives that we need to save," González said.

One argument against the head tax was that might alienate Amazon, and therefore hurt growth.

But credit rating agencies say the tax would not have hurt Seattle.

“Any impact would be felt marginally over many years and would thus be difficult to distinguish from other rationales for corporate decisions," Fitch, a credit rating agency, said in a statement. Moody’s Investors Service concurred.

Moody's also warned that Amazon likely exercised "an outsized influence" over Seattle politics, according to the Equal Opportunity Institute, a liberal think tank.

Sawant touched on this point during Tuesday’s Council meeting.

"We have to understand that the logic of bowing to big business points only in one direction, to a race to the bottom for the rest of us,” she said.

The vote followed weeks of opposition to the tax, which specifically have paid for services and low-income housing for the homeless. The tax would have charged big businesses, including Amazon, Vulcan and Starbucks, $275 per employee per year, or 14 cents per employee per hour.

The tax was unveiled as extra money for homelessness, but that wasn’t necessarily an accurate representation.

It’s possible the money wouldn’t have been extra: It could have plugged a future hole in the budget instead. Seattle had already been spending money from its construction boom on homelessness. With a depleted general fund projected to sink into the red, the city needed to find money just to stay afloat.

The head tax would have arrived just in time.

Opposition to the tax was fast and fierce. But it was unclear where the animosity stemmed from – big business or city residents, who conflated Seattle’s growing homeless problem with government inefficiency.

Homeless service providers wonder what is next.

"Every day, we turn clients away because we don’t have enough beds and we don’t have enough staff to provide long-term case management to clients in the system," Andrew Coak, a member of the task force and case manager at the Downtown Emergency Services Center, said in a statement.

"It’s literally a matter of life or death for the people I work with."

Head tax supporters are now asking business to find money for the homelessness crisis.

The No Tax on Jobs campaign, led by Saul Spady (the grandson of Dick's Drive-In co-founder Dick Spady), Pushpay's James Maiocco, and accountant Philip Llloyd, raised $350,000 in pledges to overturn the head tax, according to recent campaign disclosures.

"From Day 1, the No Tax on Jobs campaign has been a grassroots movement – and we want to thank our 2000 tireless volunteers and the more than forty-five thousand Seattle residents that signed the jobs tax repeal petition," No Tax on Jobs campaign spokesman John Murray said in a statement. "You have been heard."

Amazon, Starbucks, and Vulcan pledged $25,000 each to the group gathering signatures to put the head tax to vote this November.

Claudia Campanile is a small business owner who opposes the head tax.

"I worked on homeless causes, I was on the board for Mary's Place for many years," Campanile said. "So I'm very supportive of the homeless. But I am not supportive of the constituency getting taxed with no representation and no clear game plan of what they're going to do with the funds."

After the City Council vote, head tax opponents celebrated their victory over beer at the Fremont Brewing Company.

Sara Nelson, Fremont Brewing co-owner and one-time City Council candidate, said that even though the tax didn't apply to her, she had worried it eventually would.

"As soon as the head tax was passed it was going to be a blank check," Nelson said. "It was going to be an ATM for the city. They can up the amount whenever they want."

Nelson added that she's considering another run for the City Council next year.

The idea to tax big businesses per employee came from a City Council task force to figure out how to pay for the homeless crisis.

The Seattle Metropolitan Chamber of Commerce declined to participate in the task force.

Head tax timeline:

March 9: After six months of outreach and meetings, the task force publishes a report calling for a head tax — one of the only remaining solutions the city had to raise new revenue, task force members said — that would raise $75 million a year.

April 23: The City Council uses the task force recommendations to introduce the first head tax bill. The proposal would have taxed big businesses $500 per employee annually, and was attached to a spending plan that would have built 1,045 units of subsidized housing over the next five years.

May 2: Amazon halts construction of a downtown tower and threatens to sub-lease its stake another skyscraper pending the City Council’s vote on the head tax.

May 10: Mayor Jenny Durkan counters the City Council’s proposal with a smaller head tax: $250 per employee per year, raising about $40 million annually.

May 14: The version of the head tax passed by the City Council on this day is much smaller than the one originally envisioned.

After a negotiating with a smaller counter-proposal from Mayor Durkan, the Council votes in a $275-per-employee head tax and a spending proposal that would have built 591 units of subsidized housing.

May 15: Amazon resumes construction of the downtown tower.

May 18: A campaign to repeal the head tax launches. The No Tax on Jobs campaign is run by Saul Spady, the grandson of Dick’s Drive-In co-founder Dick Spady, PushPay’s James Maiocco, and accountant Philip Lloyd.

May 23: Campaign disclosures show that No Tax on Jobs has raised $350,000 in donations and pledges. Amazon, Vulcan, and Starbucks have pledged $25,000 each.

June 12: The City Council suspends its normal rules and votes to get rid of the head tax.

KUOW reporters Paige Browning and Casey Martin contributed updates to this report.

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