To pacify Amazon, Seattle takes less from a tax on big business that will help the poor

The ‘head tax’ charging the city’s top businesses to raise funds to combat homelessness has been halved to US$275 per employee after Amazon halted construction of office towers that would bring more than 7,000 new employees to the city

PUBLISHED : Saturday, 09 June, 2018, 12:01pm
UPDATED : Saturday, 09 June, 2018, 12:01pm

Seattle’s swelling homeless population won a battle that pitted government officials against the Emerald City’s largest employer, Amazon. In May, the Seattle City Council unanimously backed a proposal to tax the city’s top businesses US$275 per employee to raise more than $45 million toward homeless programmes.

The move came amid cheers of protesters, who carried signs saying “Tax the Rich” and “Tax Amazon: Stand up to Bezos Bullying”. But neither side came away unscathed, and simmering resentments are causing people to question the relationship between Seattle and the company that employs about one of every 10 city residents.

City officials originally sought a US$500 tax to raise US$75 million a year to fund homeless programmes, but that was nearly cut in half as a way to appease Amazon, which halted construction of two 17-storey office buildings that would bring more than 7,000 new employees to the city until after the vote.

Despite the compromise, the tax fight shows the souring relationship between Amazon and the city, especially by the company’s plan to build a second headquarters with 50,000 jobs outside Seattle and Washington state.

“We are disappointed by today’s City Council decision,” Amazon vice-president Drew Herdener said in a statement after the vote. “While we have resumed construction planning … 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.”

That might not be such a bad thing, a co-sponsor of the city tax says. “We’re not really supposed to say that,” council member Mike O’Brien told Bloomberg News. “I think it’s actually a question we probably should be asking: Can cities grow too fast?”

We are disappointed by today’s City Council decision
Drew Herdener, Amazon

Growth is at the heart of the spiralling homeless crisis here, which now has the US’ third largest homeless population. As the Seattle economy roars – unemployment now stands at 3.5 per cent – home prices have risen more than 14 per cent in the past year, one of the fastest growth rates in the country.

That has pushed more people into the streets. A May study by McKinsey & Co. found a direct correlation between rising rents and Seattle’s growing homeless population. “On a single winter night in 2017, volunteers counted 11,643 homeless people, an annual average rise of 9.2 per cent since 2014,” said the report, entitled Booming Cities, Unintended Consequences. “Over the same period, the (fair-market rent) has risen an average of 12.3 per cent a year.”

Last year, 169 people died on the streets, compared to only 32 the year before, according to the King County Medical Examiner’s Office.

“People are dying on the doorsteps of prosperity. This is the richest city in the state and in a state that has the most regressive tax system in the country,” city council member Teresa Mosqueda told the press after the vote.

Officials from some of the cities vying for Amazon’s new headquarters sounded alarm at the company’s hardball tactics in its hometown.

“By threatening Seattle over this tax, Amazon is sending a message to all of our cities: we play by our own rules”, read an open letter signed by more than 50 local lawmakers around the US in support of Seattle’s moves.

“I absolutely find it unacceptable to see politically threatening behaviour as is occurring there,” said councilwoman Robin Kniech in Denver, one of the finalist cities for Amazon’s headquarters. “It certainly doesn’t send a message that you expect to be a part of the community.”

Amazon isn’t alone in its opposition of the tax, which is aimed at the city’s top three per cent of businesses generating US$20 million or more in revenues a year. Senior executives from Starbucks, Expedia, Tableau, Alaska Airlines and others have all voiced their objections of the tax plan. Starbucks executives say city mismanagement of emergency homeless resources is to blame.

It certainly doesn’t send a message that you expect to be a part of the community
Robin Kniech, Denver councilwoman

“This city continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside,” John Kelly, senior vice-president of global public affairs and social impact at Starbucks, said in a statement. “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.”

Seattle and Washington state are the “epicentre of resistance to Trump’s agenda”, as The Washington Post wrote last year, for the measures to fight the administration’s travel bans aimed at Islamic countries. Seattle and a host of Washington state communities are “sanctuary cities”, which pledge to protect undocumented workers. In 2014, Seattle was the first city to pass a US$15 minimum wage, a move that was generating national support in the Democrat Party until Trump’s surprise election.

But to solve the area’s homeless plight, government resources are harder to come by. Washington is one of the few states in the US that doesn’t have an income tax – in fact, the state constitution specifically prohibits creation of state or local government income taxes. Instead, revenues come from property and sales taxes – and state law caps real estate tax increases to no more than one per cent a year. The head tax was seen as a way to tax the top earning companies to address the homeless crisis without running afoul of the state constitution.

This tax fight is far from over. Critics have started a petition to have a citywide referendum to overturn the tax. Meanwhile, social workers say they expect another record year of growth for Seattle’s homeless.

(This article is published in the June issue of the The Peak magazine, available at selected bookstores)