Seattle City Council Poised to Tax Amazon

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Paul Shukovsky

A proposed Seattle ordinance dubbed by some as a “tax Amazon” bill is being teed up for likely passage.

The measure would impose an employee head tax on businesses in the city with annual income exceeding $20 million—levying a tax of 26 cents per hour for each employee on the payroll minus vacation and sick time. The tax targets the top 3 percent of companies, about 500 entities with taxable gross income of more than $20 million. It was scheduled for introduction at the Seattle City Council’s April 23 meeting.

Amazon.com Inc. is the elephant in the room—it would pay about $20 million per year, some 27 percent of the estimated $75 million in annual revenue earmarked for low-income housing and homeless services, according to Councilmember Mike O’Brien, one of the measure’s sponsors.

Seattle’s vibrant economy has been supercharged by Amazon, adding impetus to some of the steepest housing price increases in the nation.

“It is the explosion of growth that is bringing a lot of high-income earners to our city,” Councilmember Lisa Herbold told Bloomberg Tax April 23. “It’s creating a hot housing market where those high-income earners are competing with lower-income people for housing units. That is precisely what is creating this increase in homelessness, this explosion of economic development. It is precisely that development which is creating the need for low-income housing.”

‘Eat the Rich’

Seattle’s experience with the fallout of such rapid growth is a lesson for cities around the country vying to be the home of Amazon’s second, co-equal headquarters, often called HQ2, Councilmember Kshama Sawant told Blooomberg Tax April 23.

“Amazon pays nothing close to its fair share,” said Sawant, a socialist economist. “We are starved of revenues to fund social services and affordable housing. But we are not just talking about the soul of the city of Seattle—this is a question facing every city. Did we do something wrong by fighting for progressive change and that is why Amazon is now looking for another HQ2 city? The working people in the cities that have been shortlisted for HQ2 are now looking to our Tax Amazon movement because they recognize they are going to face the same issues.”

Five members of the nine-member, politically progressive council have said they will vote for the measure, leaving a possible veto as the last hope for those opposed. But the mayor indicated in a recent letter that she will likely live with the council’s decision, O’Brien told Bloomberg Tax.

The measure has no shortage of opponents. The Seattle Times editorialized against the measure in its April 22 edition, calling it “the latest effort by Seattle politicians to make a symbolic ‘eat the rich’ gesture” that the newspaper asserts will “reduce jobs, opportunity and Seattle’s ability to attract new employers.” It’s a view shared by the Seattle Metropolitan Chamber of Commerce, whose President and CEO Marilyn Strickland joined more than 180 local business leaders in signing a March 27 l etter to the council calling it a “false narrative” that business is paying less than its fair share.

Amazon Opposed

Conspicuously absent from the letter were signatories who identified themselves as being from the Boeing Co., Starbucks Corp., and Nordstrom Inc.—iconic local companies.

Strickland penned an op-ed with two other authors that said: “The heated rhetoric at council meetings in support of a jobs tax has been intentionally misleading.” The assertion that “business needs to pay their fair share” ignores the fact that “almost 60 percent of Seattle’s general fund revenue comes from taxes paid by employers. That’s nearly $700 million a year. The business community also has supported city levies that raised our own taxes to support parks, transportation, housing, and the families and education levy.”

Amazon Vice President for Public Policy Brian Huseman, a former chief of staff at the Federal Trade Commission, signed the opposition letter.

  •  The company declined to comment for this story. But it provided figures quantifying the profound direct economic impact Amazon has on Seattle, including:
  •  a payroll of $25.7 billion to its more than 45,000 employees;
  •  233,000 hotel nights per year by visiting Amazonians and guests;
  •  $1.4 billion in utility and maintenance expenses; and
  •  $43 million paid into the city transportation system as an employee benefit.
A well-known Seattle nonprofit, Mary’s Place, which is dedicated to sheltering homeless people, has been able to house more than 65 families at a time in two former hotel buildings owned by Amazon located on its urban campus. Amazon also recently announced that it will build and donate to Mary’s Place a permanent shelter inside one of its new office buildings.

To contact the reporter on this story: Paul Shukovsky in Seattle at pshukovsky@bloomberglaw.comTo contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

Copyright © 2018 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State