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.”
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.
“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 & CEOAaron Easterly
Rover.com
CEOAdam Selipsky
Tableau
CEOAdam Wray
AstrumU
CEOAndy Dale
Montlake Capital
Managing PartnerAndy Liu
Unlock Venture Partners
PartnerAndy Sack
Founders Co-op
Co-founderArif Kareem
Extrahop
CEOBarry Crist
Chef Software
CEOBen Slivka
Dreambox
FounderBill Owens
Red Bison LLC
Co-founderBill Richter
Qumulo
CEOBob Kelly
Ignition Partners
Managing PartnerBob Nelsen
Arch Venture Partners
Managing DirectorBob Ratliffe
Silver Creek Capital
PresidentBrad C Kleinfelder
Plateau Software, Inc.
FounderBrad Jackson
Slalom Consulting
CEOBrad Silverberg
Fuel Capital
Co-founderBrad Tilden
Alaska Airlines
CEOBrent Frei
Smartsheet & TerraClear
FounderBryan Trussel
Glympse
Founder & ChairmanChad Robins
Adaptive Biotechnologies
Founder & CEOChia Chin Lee
BigBox VR, Inc.
CEOChris Ackerley
Ackerley Partners
PartnerChris DeVore
Founders’ Co-op
Managing PartnerChris Jostol
Mechanical Sales, Inc.
PresidentChristopher Young
ChefSteps
Co-founder & CEOClayton Lewis
Arivale
CEODan Lewis
Convoy
CEODan Sheeran
Healthslate
CEODan Todd
Influence Mobile
CEODaryn Nakhuda
Mighty AI
CEODave Cotter
MessageYes
CEODave Parker
DKParker, LLC
Managing PartnerDavid Naffziger
BrandVerity, Inc.
CEODawn LePore
Drugstore.com
Former CEODhiren Fonseca
Centares
PartnerDoug Ray
HarborTech Mobility Inc
Founder & PresidentDoug Sackville
Commercial Office Interiors
PresidentDylan Dias
Neal Analytics
CEO & Managing ConsultantEd Lazowska
University of Washington CSE
Bill & Melinda Gates ChairEric Anderson
Planetary Holdings
ChairmanEthan Caldwell
Marchex
Co-founderFrançois Locoh-Donou
F5 Networks
CEOGalen Smith
Redbox
CEOGrant Canary
DroneSeed
CEOGrant Ries
LiveRamp B2B
CEOGreg Gottesman
Pioneer Square Labs
Co-FounderHadi Partovi
Code.org
Founder & CEOHans Bjordahl
Culture Foundry
CEOHeather Redman
Flying Fish Partners
Co-Founder & Managing DirectorJ Scott Codespoti
Paradoxes, Inc.
Founder & CEOJason LaBaw
Bonsai Media Group
CEOJason Leekeenan
TraceMe
CEOJay Reitz
Axon
Seattle Office LeadJeff Hussey
Tempered Networks, Inc.
CEOJeff Malek
Code Fellows
CEOJesse Proudman
Strix Leviathan
CEOJim Gaherity
Coinstar
CEOJim O’Brien
O’Brien Business GRP
CEOJoe Heitzeberg
CrowdCow
CEOJohn Connors
Ignition Partners
Managing PartnerJohn Gabbert
Pitchbook
CEOJohn Maffei
Matcherino
CEOJohn Stanton
Trilogy Partners
FounderJon Matsuo
Koverse
CEOJon Roskill
Acumatica
CEOJonathan Sposato
PicMonkey
Founder & ChairmanKendall Kunz
Forms On Fire, Inc.
Founder & CEOKevin Gemeroy
Dynamic Computing
CEOKiran Bhageshpur
Igenous
CEOKirby Winfield
Ascend.vc
Managing MemberKristen Hamilton
Koru
Co-founder & CEOKurt Shintaffer
Apptio
CFOLauren Neiswender
Blue Nile
General CounselManny Medina
Outreach
CEOMark Britton
Avvo
Founder & CEOMark Hadland
Level 11
CEOMark Liffmann
Omnidian, Inc.
CEOMark Okerstrom
Expedia
CEOMark W. Meyer
CodeSmart, Inc.
PresidentMary Snyder
Seattle Luxury Homes
Founding PartnerMatt McIlwain
Madrona Venture Group
Managing DIrectorMichael Schutzler
WTIA
CEOMike Howell
Dolly
CEOMike Metzger
Payscale
CEONancy Heen
Axelerate, LLC
CEONick Huzar
OfferUp
CEONikesh Parekh
Suplari
CEO & Co-FounderOren Etzioni
Allen Institute for AI
CEOPaula Reynolds
Prefer West
CEOPeder Schmitz
Columbia Pacific Wealth Management
Co-founderPenny Milliken
HeR Interactive
CEOPete Christothoulou
Inspo Network
Co-founder & CEOPeter Hamilton
TUNE
CEOPeter Neupert
Adaptive Biotech, Fred Hutch, LabCorp
Board DirectorRahul Sood
Unikrn
CEORaj Singh
Accolade
CEORaja Narayana
Aditi
CEORob Eleveld
Whitepages, Inc.
CEORob Glaser
RealNetworks
Chairman & CEORob Lilleness
SmartLabs
CEORobbie Cape
98point6
Co-founder & CEORobert Lehr
Evergreen ID Systems
PresidentRobert Nelsen
Arch Venture Partners
Managing DirectorRudy Gadre
Founders Co-op
General PartnerSean Muller
iSpot.tv
CEOSethu Kalavakur
Tavour
CEOShauna Swerland Youssefnia
Fuel Talent
CEOSheila Gulatti
Tola Capital
Managing DirectorSpyro Kourtis
The Hacker Group
CEOSridhar Chandrashekar
Optio3, Inc.
Co-founder & CEOSrikant Vemparala
9Logic Technologies
PresidentStead Burwell
Swisslog Healthcare
EVPSteinar Sande
Raima Incorporated
CEOSteve Banfield
ReachNow
CEOSteve Murch
BigOven
CEOSteve Shivers
Doxo
CEOSteve Singh
Docker
Chairman & CEOSujal Patel
Isilon Systems & Ignite Bio
Founder & CEOSunny Gupta
Apptio
CEOTed Ackerley
Ackerley Partners
Managing PartnerTerry Drayton
Livible
Founder & CEOThomas Gobeille
NCA
President & CEOThor Culverhouse
Skytap
CEOTim Sooter
Legal+Plus Software Group, Inc.
CEOTodd Hooper
Vreal, Inc.
Founder & CEOTodd Owens
Azuqua
CEOTom Alberg
Madrona Venture Group
Managing DirectorTom Seery
RealSelf
Founder & CEOTom Taft
Laurel Group
Managing Partner
(Editor’s note: Jonathan Sposato is GeekWire’s chairman).
