On Monday, May 14, ongoing tension between Amazon and Seattle, the home of its headquarters, over the proposed Employee Hours Tax culminated in the City Council’s approval of a more limited tax than what had initially been proposed.
Also known as the “head tax,” the Employee Hours Tax applies to companies in Seattle that gross at least $20 million per year and will fund affordable housing and homeless services. While the tax was proposed at roughly $500 per employee annually, the approved tax was reduced to $275. Since its proposal, Amazon — the city’s largest employer — has resisted the measure. After months of lobbying efforts, Amazon Vice President Drew Herdener told the Seattle Times early this month that “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 sublease all space in our recently leased Rainier Square building.”
Despite the City Council’s decision to significantly scale back the tax, Herdener said in a statement to the New York Times, “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.” The company argues that “the city does not have a revenue problem — it has a spending efficiency problem.” Amazon resumed the previously paused construction planning on its Block 18 project, but says it is evaluating whether to sublease or occupy the Rainier Square space.
Spending efficiencies or not, Amazon’s retail transactions and its third-party marketplace have resulted in Washington losing out on upwards of $139 million in uncollected sales tax in 2016, according to Prime Numbers: Amazon and American Communities, a report on Amazon’s economic and social impact on communities around the country compiled by the American Booksellers Association and Civic Economics. The report also notes that these sales have resulted in an estimated 1,070 displaced shops and 15,495 displaced retail jobs in the state of Washington alone. In an effort to prevent a future loss of sales tax, Washington enacted a law that went into effect at the beginning of 2018 requiring marketplaces with a physical presence in Washington or annual sales to residents of at least $10,000 to collect on behalf of third-party sellers who utilize the marketplace’s platform.
Critics of Amazon’s opposition to the tax have characterized the company’s actions as efforts to bully the city. On Saturday, Councilmember Kshama Sawant and the city’s Affordable Housing Alliance organized a “March on Amazon.” A Facebook event page promoting the protest called on Seattle to “Say NO to Bezos’ bullying and extortion of our city! Say YES to taxing Amazon and big business to fund affordable housing!”
Amazon’s standoff with Seattle occurs as cities vie for selection as the location of its second headquarters in an aggressive bidding war with states and cities offering the tech company billions of dollars in tax incentives.