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Safeway Warns Seattle: New Employment Tax Could Turn Neighborhoods Into Food Deserts

Courtesy of ZeroHedge. View original post here.

A new employment tax proposed by the Seattle City Council would charge roughly $500 per employee based in the city. And though it would only apply to the city's largest companies, many of them are complaining to the press – some with good reason – about how the tax would discourage employment and ultimately damage the city's economy.

The tax would only apply to businesses earning $20 million in revenue within the city limits – a group that includes roughly 585 companies, about 3% of the total number operating in the city, according to CNNMoney.

Safeway

Businesses would be required to pay 26 cents per man hour per employee worked within the city limits, excluding vacation pay and sick time.

To what we imagine would be the delight of the Trump administration, Amazon would bear the brunt of the new tax. The e-commerce giant would be forced to contribute some $20 million annually on behalf of its nearly 45,000 employees in Seattle. Of course, Amazon will have a difficult time arguing that it can't afford the tax after it smashed expectations in its latest quarterly earnings report. And with the city facing an unemployment rate of 3.8%, even lower than the nationwide rate of 4.1%.

The city says it would use the money to build affordable housing and also provide emergency shelter services to at-risk and homeless individuals.

But Amazon told CNNMoney that it has a better plan to help the homeless.

Amazon, which declined to comment on the proposal, notes that it already contributes economically in many ways to Seattle. For example, it will provide a permanent location for a shelter in one of its new office buildings by 2020. It would be run by the nonprofit Mary's Place, which already had temporary use of two vacant Amazon buildings to shelter the homeless since 2016.

Starbucks did not respond to a request for comment.

Prosperous big businesses can in turn generate a lot of economic activity and revenue for their host city. And they may donate goods, services or money to critical social causes.

But the co-sponsors of the bill note that a major cause of homelessness is the higher cost of housing that results when more workers move to a city for jobs that pay more than long-time residents have been earning. And the demand to build affordable housing doesn't keep pace.

But city council members have apparently been ignoring pleas from Safeway, which operates 21 grocery stores in the city. The company said that if the tax is passed, it will be faced with a dilemma: Either raise prices or consider closing stores, according to Q13 Fox.

The tax would threaten stores that are in many cases the only resources in under-served neighborhoods – something that would turn those neighborhoods into food deserts.

It’s been billed as a tax on the rich, only levied on business with revenue of $20 million or more annually. But Safeway contends that the tax would end up hurting the city’s poorest families.

Currently, there are 19 Safeway stores and two Alberstons in the Seattle city limits. Albertsons is the parent company of Safeway.

In two communities, Rainier Beach and Othello, it is the only mainstream store in the area.

Chelle Jackson, the store director at the Safeway in Rainier Beach, told Fox that her store would likely be forced to close if the tax doesn't spare grocery stores.

"I grew up about five blocks up the street from here," said Jackson. "It’s the only store that’s survived the generations around here."

[...]

"It’s not about our company being in bad shape, it’s about losing stores in communities in Seattle who need them," said Osborne.

The problem is that while Safeway stores earn more than $20 million a year, their margins are razor-thin, so the tax would have a disproportionate impact.

On paper, Osborne confirms Safeway's Seattle stores bring more than over $20 million in revenue each year. But after expenses, Safeway says its Seattle locations end up with a small profit.

"The margins grocers operate within, they’re very, very small, almost razor thin," said Osborne.

If grocers aren’t exempted, and Safeway decides not to close stores, Osborne said the other option Safeway has is to raise prices. Jackson said that would be devastating to her customers.

"It would mean they couldn’t get all the things they want on their shopping list, or they would have to cut back, and it might mean that kids don’t get to take lunch to school," said Jackson.

Safeway has offered to let the city council review its stores' financials, but apparently the offer hasn't been accepted.

Safeway said if the council wants proof, they’ll gladly share their slim margins behind closed doors.

"We’re happy to share those numbers so the council members can see how close we are in some communities to it not being worthwhile in some communities to operate," said Osborne. "We want them to believe us."

Safeway wants to make it clear they believe building affordable housing and addressing the homeless crisis is an important cause they support, but in their opinion this tax isn’t the way to go.

"What we’re trying to point out is that we are addressing an affordability crisis, but we can’t address that by making food less affordable," said Osborne.

Of course, many alternatives to the progressive employment tax have been offered by firms who (correctly) point out that the city council's plan would do little to improve housing affordability and instead lead to a range of adverse consequences for workers and companies. Firms could be forced to cut pay or raise prices, which would hurt Seattle residents among every rung of the economic spectrum.

But then again, this is the same legislative body that crushed the poor and minority workers in particular by adopting a $15 minimum wage in the city.


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