Less than a month after they passed it, Seattle’s city council voted to repeal the corporate head tax after facing legitimate pressure from companies like Starbucks and Amazon.

The tax would have forced companies that make “more than $20 million a year pay an annual $275 tax per employee.” The council predicted the tax would raise $47 million a year for “affordable-housing and homeless services.”

The city council planned to use that extra tax money to counter the city’s growing homeless problem.

The council originally wanted to tax the businesses $500 for each employee. Amazon blasted the idea and threatened to stop expanding in Seattle.

High Minimum Wage and Cumbersome Regulations

Why is there a housing shortage in Seattle? Politicians and regulations of course! Seattle has a 685-page residential building code and a building code that’s 745 pages:

If you want to build apartments, you better hire lawyers and “fixers” to keep you on the right side of the rules.

Seattle’s rules insist that “Welded splices shall be of ASTM A706 steel” and “foam plastic signs shall not be greater than 1/2 inch” thick.

On the majority of Seattle’s land, building any high-rise is illegal; zoning rules say only single-family houses may be built.

Want to run a cheap flophouse with single rooms? Seattle’s rules make that just about impossible.

A landlord “must pay each of his tenants $3,000 in relocation costs” if he wants “to take a building off the market.”

Jeff Pelletier at Board and Vellum Architects explained that the permits they need are “one of the main drivers in the rise of housing in Seattle.” Yes, it’s great to be thorough on projects, but the builders “are seeing tremendous cost and schedule increases from local building departments.”

Seattle should scrap the rule that only allows single-family homes. On a plot that would hold three or four of those homes, “the city could allow developers to build projects that house more than 100 people, getting much more bang for the buck in land use.”

Another complication? The $15-an-hour minimum wage:

This year the full $15 per hour minimum wage went into effect, but the impact was felt much earlier. A University of Washington team completed a study of worker pay, hours and benefits in Seattle last and found the law was a net loss for workers.

The study concluded: “Our preferred estimates suggest that the Seattle Minimum Wage Ordinance caused hours worked by low-skilled workers (i.e., those earning under $19 per hour) to fall by 9.4% during the three quarters when the minimum wage was $13 per hour, resulting in a loss of 3.5 million hours worked per calendar quarter. Alternative estimates show the number of low-wage jobs declined by 6.8%, which represents a loss of more than 5,000 jobs.”

Keep in mind this was before the full impact of the $15 per hour minimum wage could be felt, as the law only became fully implemented this year. The situation is going to get worse in Seattle.

The Trouble With Unnecessary Corporate Taxes

When the tax bill passed earlier this year, large companies gave employees raises and data showed that many corporations used tax cuts to increase capital spending by 39%, the fastest rate in seven years.

The head tax deprived companies of needed profit. It also halted construction on a new building and a lease on another space. Both of those ideas “would provide space for 7,000 new Amazon workers.”

Instead, Amazon announced 2,000 new jobs in Boston and another 3,000 jobs in Vancouver.

The best way to fight the homeless problem? Jobs.

Denise Moriguchi, the CEO of the Asian supermarket Uwajimaya, told KOMO News that the big repeal effort “took off because people are fed up seeing tax dollars poured into programs with uncertain results.” She reminded everyone that situations don’t look like they’re “getting better, and so it’s tough and you just wonder how’s that money being spent.”

Jeff Shulman at the University of Washington’s Foster School of Business criticized the tax and described it as “the antithesis of the collaborative spirit the city is known for.” Shulman didn’t like how the tax “set up businesses as the enemy” since “in reality, the city is going to need them as allies and partners.”

[Featured image via YouTube]


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