Debate over taxes in Seattle raises alarms for Amazon HQ2 finalists

An effort to generate more revenue to address dual crises in affordable housing and homelessness has spiraled into one of the biggest fights yet between Amazon and its hometown of Seattle while raising questions for the cities competing to host the online retail giant’s second headquarters.

Five of Seattle’s nine council members support a so-called head tax, which would require big businesses to pay 26 cents per hour for each of their employees. That amounts to about $500 per employee per year for the estimated 585 Seattle businesses that generate at least $20 million in revenue every year.

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The money would be earmarked for construction of new affordable housing, and to address the city’s growing homelessness crisis. Supporters say the city’s existing tax structure — heavily dependent on sales and property taxes — needs additional revenue to foot the bill.

“Seattle has the most regressive tax systems in all of the country, and we’re looking at a way to get revenue in the door to address this public health crisis that does not raise sales taxes or property taxes once again,” said council member Teresa Mosqueda, who backs the bill. “It’s called shared responsibility so we can have shared prosperity.”

Amazon — which with 45,000 workers is the city’s largest employer by far — vehemently opposes the new tax. In a statement, Amazon Vice President Drew Herdener said the company had put on hold projects that were slated to add 7,000 new jobs. 

“I can confirm 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 sub-lease all space in our recently leased Rainier Square building,” Herdener said.

The threats have raised eyebrows among those watching the competition to host the second campus.

Richard Florida, an urban expert at the University of Toronto’s Martin Prosperity Institute, is critical of Amazon seeking taxpayer-funded incentives. In an interview, he said the company’s opposition to the head tax should raise red flags.

“I think this is problematic enough and Amazon has shown enough troubling behavior that I would drop out,” Florida said. “If you’re smart, you certainly wouldn’t offer incentives to a company that’s going to squeeze you.”

The day Amazon issued its threat to Seattle, residents heckled city council members who backed the tax at an angry town hall meeting. The next day, angry iron workers overran a rally held outside Amazon’s headquarters by another council member who backs the tax.

In another shot across Seattle’s bow, Amazon announced recently it would add 3,000 new jobs in its outpost in Vancouver, British Columbia, and 2,000 new jobs in Boston.

An analysis by the private economic firm ECONorthwest, conducted for the Seattle Chamber of Commerce, found the head tax would cost the region 14,300 jobs, $1.3 billion in worker pay, and $3.5 billion in total economic output.

Mayor Jenny Durkan (D) — inaugurated only months ago — has declined to say whether she supports the head tax.

In a statement, Durkan said she is “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.”

Lisa Herbold, a Seattle council member who backs the new head tax, said she thinks the political discussions in Seattle will have an impact on the cities competing for Amazon.

Amazon “wants to be an even bigger employer than they already are,” she said. “So a tax that charges an employer according to the number of their employees is a challenge to their growth model.”

The 20 finalists for the new headquarters are honing their proposals. Those made public have included billions of taxpayer dollars in subsidies and incentives. Maryland has offered a package worth $8.5 billion to attract the company to Montgomery County. New Jersey and Newark have combined to offer $7 billion for the project.

Most of the 20 finalists have kept their proposals under wraps, declining media and watchdog requests to make the bids public. But it’s virtually certain that those private bids include billions more in incentives and goodies.

Washington, D.C., and Northern Virginia remain in the finalist pool along with Montgomery County.

Other favorites, according to oddsmakers taking bets on the company’s decision, include Atlanta, Boston, Toronto and Austin, Texas. Tech hubs like Los Angeles, Denver and Dallas are competing with mid-market cities like Nashville, Tenn.; Raleigh, N.C.; Columbus, Ohio; Indianapolis and Pittsburgh. Miami, Philadelphia and New York City are also finalists.

While cities race to put together attractive packages to win Amazon’s business, at least a few officials have voiced concern that the project would bring significant downsides. In January, Colorado Gov. John Hickenlooper (D) said there would be “a sense of relief” if Amazon picked a city other than Denver. He later walked back those comments.

Amazon is expected to pick a winning city by the end of the year.