Seattle just killed the 'Amazon tax' it passed unanimously last month

SEATTLE -- The Seattle City Council voted 7-2 Tuesday to repeal a controversial new "Amazon tax" on employers that it passed unanimously just a month ago.

In response to public pressure and signature gathering from No Tax on Jobs, a business-backed referendum campaign, the City Council held a special meeting to repeal the so-called head tax, or employee hours tax.

The repeal vote passed, negating the need for a referendum.

Several councilmembers spoke ahead of the repeal vote in an effort to explain the council's reversal.

"Money has funded this campaign to put us in a position where we have to repeal this law," said councilmember Lorena Gonzalez. "It gives me no pleasure to have to repeal this law because I think this law was well done."

Council member Lisa Herbold said the head tax was a good idea and that the business community has won over the majority of Seattleites. She basically said their viewpoints were wrong but could not be ignored.

"This is what the vast majority of Seattle residents believe today and we don't have the time and we don't have the resources necessary to change enough minds to be successful," Herbold said.

Councilmember Teresa Mosqueda opposed the repeal and said the reality is that the city doesn't have enough resources to fight the homeless crisis. She says the city has pushed people into homelessness because of the lack of affordable housing.

"The truth is that we do not have the resources to create the shelter and the housing needed," said Mosqueda.

Mosqueda said the people who won on Tuesday were conservative groups and big businesses as well as people who oppose civil rights.

But the people who oppose the head tax say they are mostly volunteers who come from all backgrounds.

They say they are compassionate citizens who care about finding a solution to homelessness but can no longer stand by as city leaders squander taxpayer dollars without accountability.

The group No Tax on Jobs gathered 45,000 signatures in a matter of weeks. All they needed was 17,000 signatures to get the issue on the November ballot. A day after the group announced its successful momentum, councilmember Harrell announced city leaders had come up with a repeal legislation.

"It's always been about you and your inability to account for your homeless spending," Cindy Wagner said.

"You are here today blaming everyone but yourselves for continued misdirection of our city we will not back down we are growing and we expect accountable driven results," Erika Nagy said.

Mosqueda and councilmember Kshama Sawant were the only two who voted against the repeal.

Kshama Sawant went after big business specifically Amazon but then pointed the finger at her colleagues calling the repeal a cowardly act.

"Let us call it what it is it's a capitulation and it's a betrayal," Sawant said.

Before voting for the repeal, councilmember Mike O'Brien said the decision was very hard.

"I'm in a position where I will vote to repeal this," said councilmember Mike O'Brien. "But I don't have a replacement for you ... what this has proven is various components of our community have the power to stop things."

After the vote, Mayor Jenny Durkan released a statement that read, in part:

“Everyone in this city shares similar goals – we need to build more affordable housing, provide mental health and behavioral health services, and bring people off the streets and into safer spaces while continuing to support our small businesses, jobs, and economy. ... To be successful, everyone needs to be part of the solution. Instead of engaging in a prolonged, expensive political fight, the City and I will continue to move forward on building real partnerships that align our strategies from businesses, advocates, philanthropy."

The vote came after about an hour of public comment during which people from both sides of the argument shouted at councilmembers.

The crowd knew coming into the special meeting that there were enough votes for a repeal to pass.

"It's a complete betrayal to everything we have worked for," said one woman.

"The rich keeps getting richer," said another woman.

Many who supported the head tax held up signs reading "Tax Amazon."

Although Amazon was the largest company affected by the tax, nearly 600 other companies were also impacted. Companies like the grocery chain Uwajimaya.

Uwajimaya's president Denise Moriguchi spoke in front of council before the vote saying she didn't want people living in tents or camping outside but that the head tax was not the answer.

What Seattle's Employee Hours Tax would have done

The tax, which was scheduled to take effect in January 2019, amounted to $275 a year per full-time employee of the highest grossing businesses in Seattle. It would have raised roughly $47 million a year on average and expired after five years.

The revenue was intended to help fight the city's homelessness and affordable housing problems. Seattle's lack of an income tax narrows the city council's options in terms of how to raise money for public policy efforts.

The campaign had already collected more than twice the number of signatures required to let voters decide on the November ballot whether to reject the tax, according to Tim Ceis, a general consultant to the campaign.

Amazon, Starbucks and the Northwest Grocery Association were among the biggest backers of the referendum campaign.

Amazon released a statement Tuesday afternoon.

"Today's vote by the Seattle City Council to repeal the tax on job creation is the right decision for the region's economic prosperity," reads the statement, signed by vice president Drew Herdener. "We are deeply committed to being part of the solution to end homelessness in Seattle and will continue to invest in local nonprofits like Mary's Place and FareStart that are making a difference on this important issue."

Organizers of the referendum campaign maintain that the city already spends a lot of money on homelessness with few positive results, Ceis said. Their preference is for Seattle to join with other cities in King County to combat the problem and to reform the existing system of how services are provided.

In the wake of the passage of the head tax in Seattle, a number of cities in Silicon Valley have been contemplating head taxes of their own to combat traffic congestion and other transportation problems that have arisen as the tech sector dominating the area has grown.

CNN contributed to this report.