How “Bullying” Amazon Killed a Seattle Tax Meant to Help the Homeless

Amazon CEO Jeff Bezos.
Photo: Drew Angerer/Getty Images

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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.”

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.

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.


"The tax was a proposed solution to Seattle’s rising homelessness crisis."

The tax isn’t a solution to Seattle’s problems with homelessness, drug abuse, and mental health. The amendment for the tax revenue spending allocation was non-binding so there was no guarantee that the money would be spent as has been promoted. A tax is funding and if we know anything about throwing taxpayer money at these problems, it is that results will far underperform expectations and forecasts.

King County has spent over a billion dollars on their 10 year plan and they added 6,000 units of affordable housing. That is just the county money and does not include the significant contributions from the Gates Foundation and others. This proposal would have added another 500’ish units but the problem over the 10 years that King County has been doing this has only worsened. Spend all that money, build all the housing, get more homeless. That has been the result.

You can’t build your way out of this and construction in the place of shelter beds has only proven to increase the homeless population. Long term housing is, ironically, not the solution for homelessness because it ignores the root causes that drive homelessness and none of the regions that are most severely impacted by homelessness (SF, LA, Seattle, NYC) are going to start rounding people off the street and forcing them into mental health and substance abuse care. For the homeless population that has fallen due to bad luck and bad economic choices, providing stability, job assistance, and temporary financial support is what helps.

As a Seattlite; I really think this story misses the mark. There were petitions and a lot of anger when this passed. Amazon made their position known, sure, but they didn’t just steamroll the city council. This tax was positively medieval. It was indexed to nothing, so a company with ridiculous margins that pays a lot will hardly feel it relative to their profits and payrolls. A company with razor thin margins that employs the same number of people will get burned badly. Meanwhile, there are no good plans for what to do with Seattle’s existing surplus. City population has grown, sure; but city revenue per capita has also grown. As jeffnolan notes above, it was also non binding. There was really nothing good about this. It’s a state problem.
The state has an incredibly regressive tax system relying on property tax, vehicle tabs, gas tax, and sales tax. All of those hit lower income residents harder. The state does not allow income tax, for example; which is actually tied to income, and stops being a burden when income is lost. There are cash housing buyers from out of state and out of country. Many of us know the pain of being the high bidder, but losing the house or condo to a cash offer. Vancouver had this problem as well, and has taken measures to make sure housing is bought to be lived in.
There are bigger problems here, and Amazon is honestly not at the top of the list. They’re a double-edged sword, but they weren’t the reason this was repealed. Popular backlash was.

Pretty ridiculously one sided take on this. Seattle spends the most of any city in the US battling homelessness (per capita of homeless) and the problem is only getting worse. The inefficiency that they have shown in tackling this issue is mind boggling.

Also, yes, WA state has no income tax, instead we pay much higher property taxes and sales taxes. That’s an important distinction.

Finally, housing prices are not the main cause of homelessness. While yes, soaring home prices may cause temporary homelessness for some, what keeps a vast majority in that place is mental illness or drug addiction (or frequently a combination of both).

Are big businesses just angels who can do no wrong? Of course not! But the way seattle has handled this has been virtually criminal.

"After years of skyrocketing local taxes and failing public programs, Seattle voters have begun to understand that taxes alone don’t solve problems; what’s needed is strong leadership and sensible public policy. The evidence against the city council’s approach to homelessness is piling up on every street corner and public sidewalk in the city: out-of-control street camping, thousands of discarded hypodermic needles, and property crime rates four times higher than New York City."

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