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Workers, homeless service providers, and affordability advocates pack the Seattle City Council Chambers to push for and against the head tax. (GeekWire Photo / Monica Nickelsburg)

The Seattle City Council rejected a compromise version of the so-called “head tax” proposed by Mayor Jenny Durkan late Thursday night, setting up a showdown and possible veto of the controversial legislation.

Councilmembers voted down Durkan’s proposal Friday to tax Seattle’s top-tossing businesses $250 per employee each year (rather than about $500) 5-4 Friday. Durkan’s tax would have expired after five years if not renewed, rather than replacing it with a payroll tax in 2021. The legislation is set for a final vote Monday.

“Only in Seattle would $250 a head be considered conservative,” said Council President Bruce Harrell during Friday’s meeting.

As of now, it appears that the legislation has enough support to pass on a narrow 5-4 vote, but proponents would have to find another yes vote in order to build a veto-proof majority.

Update 2:30 p.m.: Durkan issued the following statement in response to the Council’s vote:

Working together, we must do everything we can to support and create good family wage jobs – it’s why I support and would sign the alternative proposal offered today by Council President Harrell and supported by three other Councilmembers. Unfortunately, the bill that passed out of committee hurts workers by stopping these good jobs, so I cannot support it.

In recent weeks, I’ve heard from thousands of constituents, hundreds of businesses of all sizes, dozens of unions, and advocates. Seattle wants us to forge common ground on a proposal that builds more affordable housing and brings people off the streets and into safer spaces while continuing to support our small businesses, jobs, and economy. I will continue to work with Council and remain hopeful that Council will pass a bill that I can sign.

The council voted down several other compromise amendments at Friday’s meeting. In a strange turn, some of the proponents of Durkan’s proposal voted down amendments because the tax on employers would be too much, while others voted no because the amendments didn’t go far enough.

The tax under consideration is designed to raise funds from the city’s top-grossing businesses to fund homeless services and affordable housing, giving it the nickname “Amazon tax.” The Seattle retailer would be taxed about $20 million annually if the legislation passes.

Amazon is fighting that tax bill by threatening to slow its growth in Seattle. The company paused construction on one of its big skyscrapers and said it is reconsidering occupying the massive Rainier Square office complex, pending the Council’s decision. Amazon’s other Seattle office developments are still moving forward.

A raucous crowd both for and against the tax in general, and Durkan’s compromise legislation, filled City Hall for the meeting. Crowds chanted “no Bezos-Durkan deal,” framing the mayor’s bill as a way to appease businesses opposed to the tax.

Monty Anderson, Executive Secretary of Seattle Building Trades, told KING 5 that Amazon would resume construction on the office tower it paused if Durkan’s plan moves forward. Anderson says that is based off a conversation with Amazon Thursday.

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