Economy & Business

Seattle’s New Employee Tax Will Drive Out Corporations, Not the Homeless

Protesters hold signs during a city council vote for a new “head tax” on the city’s biggest companies, including Amazon.com, as a way of fighting a housing crisis protestors attribute largely to a local economic boom driving real estate costs, in Seattle, Washington, May 14, 2018. (Gregory Scruggs/Reuters)
Solving the homelessness problem isn’t really Seattle’s goal.

Last week, the mayor of Seattle signed into law an “employee head tax,” which will impose on companies making $20 million or more in annual profits a fee of $275 per Seattle-based worker. The tax is just the city government’s latest attempt to seize a chunk of the city’s mega-corporations’ earnings. But members of the city council further declared that it was necessary to solving the city’s homelessness crisis, setting aside the $47 million in revenue that the tax will generate to this cause. The council cast the transfer as a matter of elementary justice: Because the city’s private companies are responsible for creating an economic boom that raised rents and forced lower-income earners out, any opposition to the new tax is really opposition to justice itself.

One problem with this argument is that the businesses targeted by the tax are not, in fact, responsible for the homelessness crisis, which has been a problem in Seattle long before the city’s economic boom (which happened around 2011). Between 2008 and 2014, according to the Department of Housing and Urban Development, the number of homeless people in King County — where Seattle is located — held steady at around 9,000. The number didn’t start increasing until 2015, and even then it rose modestly, casting doubt on the argument that rising rents are to blame. In fact, the persistence of homelessness in Seattle owes to a number of other factors, including failed attempts to solve it, a misunderstanding of its cause, and even policies passed by the city council itself.

In the draft legislation for the new tax, the city claims that it needs the money because “existing resources at the City’s disposal . . . have been inadequate.” Yet Seattle is flush with cash, and Washington’s Revenue Forecast Council predicts that by 2021 the city’s reserves will swell to $48 billion (not including the employee tax). The city’s latest budget is $5.6 billion, and it’s packed with funding for possible solutions to the homelessness crisis, including $75.2 million to one department for that purpose. According to the budget, funding for homelessness has increased 60 percent over the last four years, from $39 million to $63 million — and it hasn’t made a dent in the problem.

It can’t be said that the city lacks money to solve the crisis. It just doesn’t know how. The most inadequate resource in the city of Seattle is perhaps intelligence among city leaders, who haven’t managed to connect the so-called “homelessness solution” tax with a plan for how the receipts will be used. A nonbinding resolution offers a window into the council’s intention — building new permanent shelters or subsidizing existing apartments or homes — but it’s just that, nonbinding. It’s putting the tax before the solution.

Even worse, it’s putting the tax before the wrong solution. The council’s tentative plan borrows from Housing First, a private initiative which has been implemented in Salt Lake City. Five years after Housing First began, national media outlets celebrated Utah’s capital city for “solving” its homelessness problem, citing a 91 percent reduction in homelessness. But that reduction was in the number of the chronically homeless, not the total number of homeless people. (Those who have spent 365 or more consecutive days homeless and have a diagnosed disability — including mental illness or drug addiction — are considered to be chronically homeless.)

According to Seattle’s 2017 point-in-time count (PIT) — a federally mandated census of homeless people — 23 percent of Seattle’s homeless are chronic. Which means that if Seattle were to have as much success as Salt Lake City, only about 2,500 of its homeless would be taken off the streets, leaving more than 9,000 where they are.

Housing First may have worked for Salt Lake City, but it won’t eradicate homelessness in Seattle. The initiative works best for those who don’t have or can’t keep homes because of mental illness. As the “godfather” of the program, Sam Tsembris, told Utah’s Deseret News, Housing First isn’t as effective for, say, serious drug addicts. Indeed, of the 15-20 percent who dropped out of the program in Utah, most were addicts. In Seattle, 36 percent of homeless people — more than 4,000 — say they have a drug or alcohol addiction. When asked about the reason for losing their housing, 20 percent cited substance abuse, the second-most-common answer reported. Housing First might help on the margins in Seattle, but one has to question how effective it could be if it doesn’t target the nonchronic or serious drug addicts.

By advocating a solution that is unlikely to be effective, the councilmembers are betraying their preference for what they want the problem to be — Amazon — instead of what it actually is. The “blame capitalism” narrative justifies a heavy tax, but only 6 percent told the PIT surveyors that they lost their housing because of an inability to pay rent.

There’s another element making homelessness difficult for Seattle to solve, and it’s one that’s hard to measure. In an interview, a Seattle lobbyist who fights against the council’s heavy taxes contended that the city’s embrace of progressive socioeconomic policies, including the legalization of marijuana and rules preventing police from fining homeless people for violating the city code, is attracting transient homeless people. Indeed, the PIT survey found that 9 percent of Seattle’s homeless said their last home was outside Washington, and a whopping 43 percent said they’ve lived in King County for fewer than 4 years. As homelessness becomes more of a culture in Seattle, shelter loses priority. In April, Seattle news outlet KIRO7 reported that only 37 percent of homeless people contacted by the Seattle Navigation Team, a mix of outreach workers and police, accept offers of shelter. One homeless woman, Melissa Burns, offered a window into why, explaining that she doesn’t want permanent housing because “the solution to the homeless problem” is “autonomy, right here” — on the street.

It is reasonable to wonder whether solving the homeless problem is really the council’s goal. Self-described socialist councilwoman Kshama Sawant made her intentions clear by printing “Tax Amazon” posters — with council materials, no less — and distributing them to supporters of the measure before the vote. The council has been struggling to grab a slice of the Seattle corporations’ profits since the boom, and pledging to use this tax revenue to help the homeless is its most successful strategy yet. The last attempt was an embarrassing failure: A citywide personal-income tax on the city’s highest earners was found to be illegal under Washington’s constitution earlier this year.

In the end, the council is taking a big risk that promises little reward. Not only is the plan unlikely to make a dent in the homelessness numbers, but if the companies that moved to Seattle in search of a business-friendly environment head for greener pastures, problems Seattle hasn’t seen in a decade will return.

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