At NPQ, we have written often about cities offering to throw tax dollars at Amazon to become the company’s second headquarters. But as we have also noted before, “Seattle, home of ‘HQ1’ is less than enthusiastic about the company,” as a new story from Seattle attests.
On Monday, the city voted unanimously “to tax the city’s largest employers to help address homelessness,” write Daniel Beekman and Matt Day in the Seattle Times, but the unanimous vote did not come without considerable strife. Tensions are still high. As Nick Wingfield writes in the New York Times, “The council had originally considered an annual ‘head’ tax of $500 per full-time employee for Amazon and other large employers, but the amended measure that passed reduced that figure to $275…The council also included a sunset provision that would require the tax to be reauthorized in five years.”
According to Beekman and Day, the original tax would have raised $86 million a year; however, that measure passed 5-4 in a preliminary committee vote, and a mayoral veto that would require six votes to override was likely. Amazon contributed $350,000 to a group that supports current Seattle mayor Jenny Durkan, who threatened to veto the higher tax rate because she said it was too risky to the local economy. The lower rate is expected to generate $47 million a year.
While the politics may be fractious, the gravity of Seattle’s housing crisis is well understood. Seattle declared a homelessness state of emergency in late 2015. The Institute for Children, Poverty & Homelessness found that in the 2015-2016 school year, one in 16 children in Seattle were homeless.
“We have community members who are dying,” said Councilmember Teresa Mosqueda before the 9-0 final vote. “They are dying on our streets today because there is not enough shelter.”
Beekman and Day add, “Along with the tax Monday, the council approved a nonbinding resolution that calls for spending 66 percent of the new money on affordable housing, 32 percent on emergency shelter, trash pickup, raises for service workers and other needs, and two percent on administration. The plan says the revenue could help build 591 units of low-income housing over five years—down from 1,700 units slated under the $500-per-head tax.”
The tax has been dubbed the ‘Amazon Tax’ by locals. But about 585 businesses—not just Amazon—are affected. “Technically,” comments Bryan Menegus in Gizmodo, the tax is “calculated by multiplying working hours by about 26 cents for full-time employees (defined as 480 or more hours per quarter) at Seattle businesses generating over $20 million in revenue per year.”
According to Beekman and Day, Amazon, based on its 45,000 employees, is expected to pay $10 million of the expected $47 million total. Other prominent firms that are affected include Starbucks, The Seattle Times, and longtime, family-owned supermarket Uwajimaya.
For a company that earned a record quarterly profit of $1.9 billion in the last three months of 2017, a tax of ten or twenty million dollars might not seem a big deal, but Amazon fought the tax tooth-and-nail, even temporarily halting two major expansion projects to oppose it. With the smaller tax increase, Amazon says it will “restart the planning process for one of its new buildings.” Wingfield adds that Amazon is “still exploring the possibility” of leasing rather than owning the second building.
Amazon vice president Drew Herdener said, “We remain 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.” Starbucks, which had fourth-quarter profits last year of $788.5 million, was also loud in its opposition. Beekman and Day write,
In a biting statement, a Starbucks spokesman accused city leaders of failing to spend effectively on homelessness and ignoring children sleeping outside.
“If they cannot provide a warm meal and safe bed to a five-year-old child, no one believes they will be able to make housing affordable or address opiate addiction,” says Starbucks’ John Kelly, a top public-affairs executive.
Amazon’s hardball tactics have garnered concern among cities bidding to host Amazon’s planned second headquarters. Robin Kneich of the Denver City Council remarked, “I absolutely find it unacceptable to see politically threatening behavior as is occurring there. It certainly doesn’t send a message that you expect to be a part of the community.” Denver is one of the 20 cities still in the running for Amazon’s second headquarters.
Kniech joined more than 50 local lawmakers who sent an open letter to Seattle leaders and residents on Monday, supporting the tax and criticizing Amazon’s resistance. The letter said, “By threatening Seattle over this tax, Amazon is sending a message to all of our cities: we play by our own rules.”—Steve Dubb