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Just weeks after Seattle passed a new business tax that would have had Amazon shelling out additional funds to help the homeless, the city has now reversed its decision.
The Seattle City Council voted to repeal the “head tax” late Tuesday afternoon, even though it voted unanimously in favor of it only one month ago. In a move that some on the city council have called “backroom betrayal” as a result of “bullying by Amazon,” the abrupt 180 on the tax plan is stunning and proves just how powerful Amazon truly is.
The tax was a proposed solution to Seattle’s rising homelessness crisis. It targeted for-profit companies in the state that gross more than $20 million annually. Starting in January 2019, these businesses would have had to pay $275 per employee, and Seattle was expected to collect about $50 million. The funds were to go toward affordable housing as well as programs aimed at ending homelessness. Washington state collects no income tax, so the city is seriously lacking funds for public service programming.
While the Seattle tax would have affected 585 companies, the city really had its eye on Amazon since it’s the largest, with some 45,000 employees. CEO and Amazon founder Jeff Bezos is also the richest person in the world, and the company was recently the subject of an angry tweet from President Donald Trump, who accused it of not paying taxes. (It’s way more complicated than that.)
The vote to repeal the tax Tuesday was abrupt, chaotic, and heated. The Seattle Times reports that shouting activists chanted slogans like “housing is a human right,” and held signs that read “tax Amazon.” One council member was near tears as she admitted that “the opposition,” a.k.a. Amazon, has “unlimited resources.”
URGENT ACTION ALERT on Amazon Tax to build affordable housing: @SeattleCouncil will repeal the tax on big biz at noon tomorrow! This is a capitulation to bullying by Amazon & other big biz. This backroom betrayal was planned over weekend w/o notifying movement (incl. my office).— Kshama Sawant (@cmkshama) June 11, 2018
Amazon has been playing hardball over the tax for some time now. In early May, the company abruptly stopped construction on a new campus in downtown Seattle; an Amazon spokesperson said it was because of the tax. The spokesperson also said that the company was “evaluating options,” and was considering subleasing another space instead of occupying the building. This all sent the message that Amazon wasn’t tied to Seattle. That certainly wasn’t a bluff, considering cities all over the country are trying to court the tech giant to build its second American headquarters in one of their cities.
“The city does not have a revenue problem — it has a spending efficiency problem,” Drew Herdener, an Amazon vice president, told the New York Times regarding the tax. “We are highly uncertain whether the City Council’s anti-business positions or its spending inefficiency will change for the better.”
Seattle had already bowed partially to Amazon, bringing the tax amount down from its original proposal of $500 per employee. Once the city council passed the head tax Amazon resumed its construction, but said it remained “very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”
Amazon then went to work to make sure it got its way. Along with the most powerful companies in Seattle — including Starbucks and Vulcan, the investment firm of Microsoft co-founder Paul Allen — the coalition paid for an organized effort called No Tax on Jobs. They spent nearly $300,000 to get signatures, and both Amazon and Starbucks said they would pledge hundreds of thousands more. In no time at all, the campaign amassed enough support to get an option to repeal the tax on a November ballot. The Seattle Metropolitan Chamber of Commerce was also reportedly doing Amazon’s bidding by convincing tons of voters to go against the tax. Seattle was essentially backed into a corner.
“We heard you,” a statement released by Seattle Mayor Jenny Durkan and city council president Bruce Harrell read. “The City remains committed to building solutions that bring businesses, labor, philanthropy, neighborhoods and communities to the table. Now more than ever, we all must roll up our sleeves and tackle this crisis together.”
Some Seattle natives tell Racked they, too were keen on getting the tax repealed. For one thing, some locals were furious the tax lumped small, local businesses together with giants like Amazon and Starbucks. The law also didn’t take important details into consideration, like size, structure, or industry of a company; local grocery chains that gross $20 million, for example, would subsequently be hit with the tax, but their margins and losses are vastly different from a company like Microsoft. And many worried the tax would ruin the economy, especially if the new law made businesses flee the state.
Once the tax was repealed, Amazon released a statement calling it “the right decision.” It also says it’s committed to working with the city for a solution.
Statement on Seattle City Council's vote: pic.twitter.com/4LjHFGlQwf— Amazon News (@amazonnews) June 12, 2018
There has been no proposed solution, though, to replace the Amazon tax, as it’s been called. Seattle has the third-largest homeless population in the US, after New York and Los Angeles. Living costs and overall city expenses have skyrocketed over the years — a phenomenon some call the “Amazon effect,” with many directly attributing the problem to the tech company.
Amazon has pushed forward its expansion plans as income inequality and poverty rage through its city. When the company announced it was looking to build a second headquarters, city councilmember Kshana Sawant said Amazon has been “using its monopoly power to gobble up swathes of prime Seattle real estate, and extract plum deals from the city’s Democratic establishment. This political establishment has, in the meanwhile, overseen an explosion in homelessness and an acute crisis in affordable housing.” The tech giant has rebuffed these accusations.
Since Seattle first voted for the tax, there’s been consideration about whether California’s Mountain View should have its own “Google tax,” and Cupertino its own “Apple tax.” If there’s anything we’ve learned from Amazon’s victory over Seattle, its that these tech companies will not go down without a fight — and they probably have enough power to win.
Update: Thursday, June 14, 10:30 am.
This post has been updated with information on the final vote, and with comment from Seattle locals.