In the latest development in the controversy surrounding the Seattle City Council’s proposed business tax plan, or “head tax,” Amazon has stopped development in downtown Seattle until the council votes on the proposal.
Stakeholders say Amazon has had enough of anti-business actions taken by city leadership, and the tax plan may be the final straw for business owners looking to continue operating in or considering a move to Seattle.
At the end of last month, the council released its proposal to raise $75 million for affordable housing options and to address homelessness.
The plan would require the largest 500 Seattle businesses to pay $0.26 per hour, per employee working in Seattle in 2019 and 2020. This “head tax” penalty is anticipated to cost business owners $500 per year per fulltime worker.
In 2021, the head tax would change to a business payroll tax which would take 0.7 percent. The Council is scheduled to vote on the tax plan on May 14, with meetings held through May 9.
Soon after its release, business stakeholders vocally opposed the proposal, arguing it would end up scaring away potential businesses and lower the number of low-income employees a company can hire.
On May 2, Amazon Vice President Drew Herdener said, “Pending the outcome of the head tax vote by City Council, Amazon has paused all construction planning on our Block 18 project in downtown Seattle and is evaluating options to sub-lease all space in our recently leased Rainier Square building.”
Combined, the project would provide more than 7,000 new Amazon jobs, not including any indirect jobs.
Jason Mercier, Director for Government Reform at the Washington Policy Center (WPC), told Lens that city leadership actions make it harder and harder for Seattle to appeal to new business.
“If Amazon is signaling that Seattle is no longer hospitable for a home-grown company with many employees, what open arms should another employer look for if considering to relocate here or grow when starting a business in Seattle?”
He added that Seattle will have to decide whether it will continue putting a target on the business community with anti-corporation and anti-growth comments coming from the city council.
“The surprising thing is not what Amazon is doing…they are just responding to the market that they have other options.
“In the last 24 hours, the shocking reaction is coming from the city council saying they are surprised Amazon would do this. It’s no surprise if they keep targeting business that they will look elsewhere.”
In an online statement, the city council wrote: “This was never a proposal targeting one company, but Amazon made the conversation about them when they expressed their intentions to pause construction on their new office tower pending a vote on our Progressive Tax on Business.”
The council cited that Amazon made $1.9 billion in profits in the fourth quarter of 2017, and estimated the company would pay $20 million annually from the proposed head tax.
Council members added that there isn’t enough revenue to provide enough affordable housing for everyone and provide shelter for those in need.
“While Amazon didn’t single-handedly cause this problem, they have contributed to the growing income inequality, displacement and housing affordability issues facing our City,” the council wrote. “It seems only fair…that we ask those…corporations to financially contribute to the public health and housing solutions designed to address those consequences.”
Mercier said the council must realize that it needs a thriving business climate in Seattle for its programs to succeed.
“I think you are starting to see a catalyst happen that we may have reached the tipping point from how much the Seattle business community is willing to tolerate before pushing back.”
Back in January the majority of the city council signed a letter saying that it recognized the problem with the relationship with Amazon, and they want to “reset” so the company doesn’t feel unwelcome in the city.
“Then they drop the head tax,” State Sen. Guy Palumbo (D-1) told Lens. “I think the company and other industries are getting the message loud and clear that Seattle doesn’t want business.
“It’s problematic not just for Seattle but for the entire state, because if the head tax passes I think that if they leave…the loss of 7,000 additional jobs would be the tip of the iceberg.”
Palumbo added that if city leadership keeps sending the same signals to business, Seattle may no longer be considered an innovation center.
“I see a lot of people questioning whether this is just hardball or a bluff to gain leverage over the head tax. I think everyone needs to take a deep breath and understand that this is probably the last nail in the coffin and is absolutely not a bluff…only the tip of the iceberg.”
Matt McIlwain, Managing Director for Madrona Venture Group, said Amazon’s presence in Seattle is important for attracting talented people who may work at a start-up, along with being able to observe the company’s successes and faults as it test innovative new ideas.
“I applaud Amazon for taking this action which communicates that the decisions of Seattle’s City Council will have consequences on job creation and economic opportunities for all Seattleites,” he added.
McIlwain continued: “I hope Seattle’s political leadership steps back to consider all the direct and indirect economic and civic benefits Amazon provides to our community and the world before making their final decision on the jobs tax.”
Seattle Mayor Jenny Durkan voiced concern about what Amazon’s decision could mean for all industries operating within Seattle.
“I’m deeply concerned about the impact this decision will have on a large range of jobs – from our building trades, to restaurant workers, to nurses, manufacturing jobs and tech workers,” Durkan said in a statement to the media. “At the same time, our City must urgently address our homelessness and affordability crisis and lift up those who have been left behind. I fundamentally believe we can do both by working together.”
Durkan added she would bring the city council, labor, business and community leaders together over the next few days to determine how they can resolve the issue and keep jobs.