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(Flickr Photo / Daniel X. O’Neil)

The Seattle tech community is following Amazon’s lead, publicly pressing the City Council to drop a proposed tax on top-earning companies to fund affordable housing and homeless services. On Tuesday afternoon, 130 startup founders, CEOs, venture capitalists, and other business leaders issued an open letter to Mayor Jenny Durkan and the City Council opposing the so-called “head tax” and warning about its potential consequences.

“Instead of a strategic plan to address growth, the Council has proposed to tax only 3% of our city’s largest business, charging them a flat rate per worker they hire, making businesses pay a price for creating jobs,” the letter says. “This is like telling a classroom that the students who do the most homework will be singled out for detention.”

Tech leaders who signed the letter include Expedia CEO Mark Okerstrom, Madrona Venture Group Director Matt McIlwain, F5 CEO François Locoh-Donou, Flying Fish Partners co-founder Heather Redman, and OfferUp CEO Nick Huzar. (Scroll down for the full list.)

The proposal would levy a tax of about $500 per employee, per year, on companies with more than $20 million in revenue.

“We oppose this approach, because of the message it sends to every business: if you are investing in growth, if you create too many jobs in Seattle, you will be punished,” the letter reads. “Sending this message to entrepreneurs, investors, and job creators will cause far greater damage to Seattle’s growth prospects than the direct impact on the businesses being taxed. Not all of the undersigned are directly impacted by this tax, yet we all agree it is a bad idea.”

The head tax has become a lightning rod in Seattle, igniting furious debate and angry clashes that call into question whether the “Seattle nice” stereotype still holds in this period of unprecedented growth.

The controversial proposal reached a boiling point last week when Amazon paused construction on a new skyscraper downtown and said it was reconsidering whether or not it will occupy the massive Rainier Square office complex or sub-lease it out to another company, pending the city’s decision. Seattle City Councilmember Kshama Sawant held a press conference at Amazon’s Seattle headquarters urging her colleagues not to back down but her entreaty was drowned out by dozens of iron workers, who work on construction projects for Amazon, shouting, “no head tax.”

Seattle City Councilmember Kshama Sawant (left) and supporters call for a tax on big business during an event at Amazon headquarters last week. (GeekWire Photo / Monica Nickelsburg)

The City Council estimates that the head tax would generate about $75 million per year, with approximately $57 million dedicated to building affordable housing. The remaining funds would go toward services for people experiencing homelessness. Seattle’s largest private employer, Amazon, would be on the hook for about $20 million per year under the tax, starting in 2019. In 2021, the head tax would be phased out and replaced with a payroll tax of 0.7 percent.

Although the list of signatories is long, others in the Seattle tech industry support the head tax. Seattle Tech 4 Housing founder Ethan Phelps-Goodman connects tech workers with volunteer and advocacy opportunities to fight homelessness and displacement. He believes the loudest voices in the debate are creating a false narrative that the tech industry, as a whole, is against the head tax.

“That’s certainly not true in the grassroots that I see,” he said in an interview with GeekWire last week.

Phelps-Goodman said he believes the Seattle tech industry could actually benefit competitively if the head tax were to pass.

Ethan Phelps-Goodman, founder of Seattle Tech 4 Housing. (GeekWire Photo)

“The competitive advantage that Seattle has, as an industry, is primarily in our relatively affordable housing,” he said. “We don’t have more workers here or more educated workers than they have in the Bay Area. We certainly don’t have more venture capital than in the Bay Area. There’s more of everything that you would build businesses around in the Bay Area except that you can’t afford to live there.”

Seattle has been in an official state of emergency over its homelessness crisis since 2015. The city has the third-largest homeless population in the country, behind New York and Los Angeles, according to Zillow data. The roots of Seattle’s disproportionately high homelessness population are almost as controversial as the head tax itself but the crisis is typically attributed to rapid growth and zoning that restricts where multi-family housing can be built.

Seattle is one of the fastest growing cities in the country, driven largely by the booming tech industry. Despite all of those newcomers, 69 percent of residential land plots are occupied by single-family homes, according to The Seattle Times. Seattle home prices have grown more rapidly than any other city for the past 17 months in a row and the phenomenon doesn’t show signs of slowing. The Puget Sound Regional Council estimates the region will add 1.2 million jobs and 1.8 million people by 2050.

The Seattle City Council estimates that it could build 1,780 “deeply affordable” housing units over the next five years if the head tax passes. The city says the funds would also go toward removing 100,000 pounds of garbage from the streets each year and maintaining an additional 362 shelter beds per year.

“I get when people say it’s a tax on jobs and anything you tax is unfortunate,” Phelps-Goodman said. “The question is, can you get your money’s worth from that tax? Can you get a societal benefit that’s worth whatever the costs of that tax are? So when you’re, in this case, pairing about a doubling of the production of deeply affordable supportive housing against the $20 million a year for Amazon and $75 million total, it just seems so obviously worth the effort.”

Jeff Reifman, a Microsoft alum and founder of MeetingPlanner.io, wrote in an op/ed today, “This is what Amazon does, it plays communities against each other. … Frankly, I can’t think of anything better for Seattle right now than moderating our growth and allowing time for our region to catch up with the services and infrastructure needed to address this past decade’s expansion.”

A study commissioned by the Seattle Metropolitan Chamber of Commerce — which has actively campaigned against the tax — suggests that it may have unintended consequences for Seattleites on the verge of homelessness. According to the analysis, job growth for low-wage earners could slow because they “would become relatively more expensive to employers than high-wage jobs.” The study was conducted by the consultancy firm ECONorthwest and paid for by the Chamber.

The signatories of the open letter sent Tuesday are calling for a “prioritized spending plan” to address Seattle’s homeless crisis, a mix of taxes to fund the plan, and rezoning of single-family neighborhoods as alternatives to the head tax.

“We will gladly help convene our city’s business leaders, labor leaders, and Council members, to collectively design a plan that works for all groups,” the letter says.

Not all of the companies represented on the list of signatories would be directly impacted by the tax but they are unified in opposition to it. Representatives from many of those companies plan to attend a public hearing on the tax at 9:30 a.m. in Seattle Wednesday.

Continue reading for the full letter and list of signatories.

To the citizens and Councilmembers of the City of Seattle,

As CEOs, leaders, and investors in our region’s growing economy, from businesses small and large, the undersigned are opposed to the Seattle City Council’s proposed “head tax.” We all care deeply about the issues facing the city, and many of us already play an active role in helping. We oppose this tax and recommend an alternate approach.

Seattle is among the fastest growing cities in the U.S., thanks to our culture of innovation and collaboration, our welcoming approach to newcomers, and our profound natural beauty. We all proudly appreciate the benefits of this growth including a 3.1% unemployment rate which is well below Seattle’s 5.4% long term average. We also recognize its challenges. Our city’s infrastructure and public services must expand to support a growing population that expanded by 64,000 in 2016, and rising housing costs and homelessness affect our entire community. These problems won’t solve themselves. It will take collaboration and dialogue to come up with innovative solutions to maintain a thriving economy in our wonderful city.

The City Council’s proposal for a “head tax” is not a solution. Instead of a strategic plan to address growth, the Council has proposed to tax only 3% of our city’s largest business, charging them a flat rate per worker they hire, making businesses pay a price for creating jobs. This is like telling a classroom that the students who do the most homework will be singled out for detention.

We oppose this approach, because of the message it sends to every business: if you are investing in growth, if you create too many jobs in Seattle, you will be punished. Sending this message to entrepreneurs, investors, and job creators will cause far greater damage to Seattle’s growth prospects than the direct impact on the businesses being taxed. Not all of the undersigned are directly impacted by this tax, yet we all agree it is a bad idea.

A proper approach would combine evaluating the need for additional expenditures beyond the city’s 17.4% increase the past 3 years, tax revenue increases based on an optimal mix of taxes, a prioritized spending plan to address both housing and infrastructure, as well as new zoning and related policies to reduce the costs of housing and construction.

We are all aware of the challenges our city faces. As leaders in Seattle’s business community, it is our shared responsibility to offer solutions, not just criticism. We ask the City Council to set aside the misguided “head tax,” and to engage us in more dialogue. We will gladly help convene our city’s business leaders, labor leaders, and Council members, to collectively design a plan that works for all groups. We can also learn from how other cities have succeeded or failed to manage similar growth. We are not the first city to cope with hyper-growth; let’s learn from the best ideas of those before us.

Our city is stronger when we work together to find solutions that meet everybody’s needs. Let’s join forces to make a plan that sustains the growth our city is proud of, while also addressing the problems of housing, homelessness and infrastructure. That is what great cities do – let’s show our community and the world what Seattle can do together!

Signed,
Aaron Bird
Bizible
Founder & CEO

Aaron Easterly
Rover.com
CEO

Adam Selipsky
Tableau
CEO

Adam Wray
AstrumU
CEO

Andy Dale
Montlake Capital
Managing Partner

Andy Liu
Unlock Venture Partners
Partner

Andy Sack
Founders Co-op
Co-founder

Arif Kareem
Extrahop
CEO

Barry Crist
Chef Software
CEO

Ben Slivka
Dreambox
Founder

Bill Owens
Red Bison LLC
Co-founder

Bill Richter
Qumulo
CEO

Bob Kelly
Ignition Partners
Managing Partner

Bob Nelsen
Arch Venture Partners
Managing Director

Bob Ratliffe
Silver Creek Capital
President

Brad C Kleinfelder
Plateau Software, Inc.
Founder

Brad Jackson
Slalom Consulting
CEO

Brad Silverberg
Fuel Capital
Co-founder

Brad Tilden
Alaska Airlines
CEO

Brent Frei
Smartsheet & TerraClear
Founder

Bryan Trussel
Glympse
Founder & Chairman

Chad Robins
Adaptive Biotechnologies
Founder & CEO

Chia Chin Lee
BigBox VR, Inc.
CEO

Chris Ackerley
Ackerley Partners
Partner

Chris DeVore
Founders’ Co-op
Managing Partner

Chris Jostol
Mechanical Sales, Inc.
President

Christopher Young
ChefSteps
Co-founder & CEO

Clayton Lewis
Arivale
CEO

Dan Lewis
Convoy
CEO

Dan Sheeran
Healthslate
CEO

Dan Todd
Influence Mobile
CEO

Daryn Nakhuda
Mighty AI
CEO

Dave Cotter
MessageYes
CEO

Dave Parker
DKParker, LLC
Managing Partner

David Naffziger
BrandVerity, Inc.
CEO

Dawn LePore
Drugstore.com
Former CEO

Dhiren Fonseca
Centares
Partner

Doug Ray
HarborTech Mobility Inc
Founder & President

Doug Sackville
Commercial Office Interiors
President

Dylan Dias
Neal Analytics
CEO & Managing Consultant

Ed Lazowska
University of Washington CSE
Bill & Melinda Gates Chair

Eric Anderson
Planetary Holdings
Chairman

Ethan Caldwell
Marchex
Co-founder

François Locoh-Donou
F5 Networks
CEO

Galen Smith
Redbox
CEO

Grant Canary
DroneSeed
CEO

Grant Ries
LiveRamp B2B
CEO

Greg Gottesman
Pioneer Square Labs
Co-Founder

Hadi Partovi
Code.org
Founder & CEO

Hans Bjordahl
Culture Foundry
CEO

Heather Redman
Flying Fish Partners
Co-Founder & Managing Director

J Scott Codespoti
Paradoxes, Inc.
Founder & CEO

Jason LaBaw
Bonsai Media Group
CEO

Jason Leekeenan
TraceMe
CEO

Jay Reitz
Axon
Seattle Office Lead

Jeff Hussey
Tempered Networks, Inc.
CEO

Jeff Malek
Code Fellows
CEO

Jesse Proudman
Strix Leviathan
CEO

Jim Gaherity
Coinstar
CEO

Jim O’Brien
O’Brien Business GRP
CEO

Joe Heitzeberg
CrowdCow
CEO

John Connors
Ignition Partners
Managing Partner

John Gabbert
Pitchbook
CEO

John Maffei
Matcherino
CEO

John Stanton
Trilogy Partners
Founder

Jon Matsuo
Koverse
CEO

Jon Roskill
Acumatica
CEO

Jonathan Sposato
PicMonkey
Founder & Chairman

Kendall Kunz
Forms On Fire, Inc.
Founder & CEO

Kevin Gemeroy
Dynamic Computing
CEO

Kiran Bhageshpur
Igenous
CEO

Kirby Winfield
Ascend.vc
Managing Member

Kristen Hamilton
Koru
Co-founder & CEO

Kurt Shintaffer
Apptio
CFO

Lauren Neiswender
Blue Nile
General Counsel

Manny Medina
Outreach
CEO

Mark Britton
Avvo
Founder & CEO

Mark Hadland
Level 11
CEO

Mark Liffmann
Omnidian, Inc.
CEO

Mark Okerstrom
Expedia
CEO

Mark W. Meyer
CodeSmart, Inc.
President

Mary Snyder
Seattle Luxury Homes
Founding Partner

Matt McIlwain
Madrona Venture Group
Managing DIrector

Michael Schutzler
WTIA
CEO

Mike Howell
Dolly
CEO

Mike Metzger
Payscale
CEO

Nancy Heen
Axelerate, LLC
CEO

Nick Huzar
OfferUp
CEO

Nikesh Parekh
Suplari
CEO & Co-Founder

Oren Etzioni
Allen Institute for AI
CEO

Paula Reynolds
Prefer West
CEO

Peder Schmitz
Columbia Pacific Wealth Management
Co-founder

Penny Milliken
HeR Interactive
CEO

Pete Christothoulou
Inspo Network
Co-founder & CEO

Peter Hamilton
TUNE
CEO

Peter Neupert
Adaptive Biotech, Fred Hutch, LabCorp
Board Director

Rahul Sood
Unikrn
CEO

Raj Singh
Accolade
CEO

Raja Narayana
Aditi
CEO

Rob Eleveld
Whitepages, Inc.
CEO

Rob Glaser
RealNetworks
Chairman & CEO

Rob Lilleness
SmartLabs
CEO

Robbie Cape
98point6
Co-founder & CEO

Robert Lehr
Evergreen ID Systems
President

Robert Nelsen
Arch Venture Partners
Managing Director

Rudy Gadre
Founders Co-op
General Partner

Sean Muller
iSpot.tv
CEO

Sethu Kalavakur
Tavour
CEO

Shauna Swerland Youssefnia
Fuel Talent
CEO

Sheila Gulatti
Tola Capital
Managing Director

Spyro Kourtis
The Hacker Group
CEO

Sridhar Chandrashekar
Optio3, Inc.
Co-founder & CEO

Srikant Vemparala
9Logic Technologies
President

Stead Burwell
Swisslog Healthcare
EVP

Steinar Sande
Raima Incorporated
CEO

Steve Banfield
ReachNow
CEO

Steve Murch
BigOven
CEO

Steve Shivers
Doxo
CEO

Steve Singh
Docker
Chairman & CEO

Sujal Patel
Isilon Systems & Ignite Bio
Founder & CEO

Sunny Gupta
Apptio
CEO

Ted Ackerley
Ackerley Partners
Managing Partner

Terry Drayton
Livible
Founder & CEO

Thomas Gobeille
NCA
President & CEO

Thor Culverhouse
Skytap
CEO

Tim Sooter
Legal+Plus Software Group, Inc.
CEO

Todd Hooper
Vreal, Inc.
Founder & CEO

Todd Owens
Azuqua
CEO

Tom Alberg
Madrona Venture Group
Managing Director

Tom Seery
RealSelf
Founder & CEO

Tom Taft
Laurel Group
Managing Partner

(Editor’s note: Jonathan Sposato is GeekWire’s chairman).

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