Sarah Holder is a staff writer at CityLab covering local policy, housing, labor, and technology.
After the city passed a tax on businesses to tackle its housing crisis, corporations mounted a counter-attack. And other cities are watching.
Last month, Seattle’s city council unanimously passed a controversial new tax on businesses to fund affordable housing and homeless initiatives in the city. The bill became known as the “Amazon tax,” because of threats by Amazon to halt new construction if the tax passed, but many other companies, too, warned that it would stifle business development in the city.
By the time the City Council voted on it, the tax had shrunk to almost half the size of the original proposal. Still, with its passage, the city was guaranteed to net an extra $47 million a year; Amazon promised it would resume construction; and activists declared victory. But the story hasn’t ended there.
Days after the tax’s passage, Amazon and several other companies including Seattle-based Starbucks quietly poured hundreds of thousands of dollars into a campaign to revoke the tax by a citywide vote, potentially drawing out the battle at least until November. If their ballot initiative is approved, the referendum will be a test of a city’s attempts to battle the unaffordability that followed mega-corporations like Amazon into Seattle. And ripple effects could also be felt farther, in cities that are considering new, more aggressive taxes on business of their own—like Mountain View, California; home to Google’s headquarters and 23,000 of its employees.
“It was a David versus Goliath fight that we were able to win that tax,” said Kshama Sawant, a Seattle city councilor and a member of the Socialist Alternative party. “But we weren’t powerful enough to win the whole thing.”
The tax may be defeated even before a ballot initiative is certified. Mayor Jenny Durkan, along with seven out of nine Seattle city council members, issued a statement Monday, saying the council would consider repealing the tax itself. That would eliminate the need for voters to weigh in at all. "We heard you," she wrote, referring to vocal opposition. “It is clear that the ordinance will lead to a prolonged, expensive political fight over the next five months that will do nothing to tackle our urgent housing and homelessness crisis. These challenges can only be addressed together as a city, and as importantly, as a state and a region.”
The tax in question is characterized as a “head tax” because it’s levied on each worker head—Seattle’s will charge the city’s largest three percent of companies $275 per employee, per year for the next five years. Based on Amazon’s employment record, the company will pay about a third of the city-wide fund, which will be used to build almost 900 units of affordable housing; and to provide wrap-around services for Seattle’s 12,000 unhoused residents, the third-largest homeless population in the country.
The new, corporation-backed non-profit advocating for a referendum of the tax calls itself No Tax on Jobs, and its focus is narrow: To get the referendum on the ballot, all the organization needs to do it is collect a little more than 17,000 signatures by June 14. Already, they’re confident that they’ll hit it. “We're well over the target we set for ourselves, and we're in a comfortable position to ensure we're going to be on the ballot in November,” James Maiocco, chair of the No Tax on Jobs committee, told K5 News.
Amazon, along with Starbucks, Vulcan, Kroger, and Albertsons have made $25,000 donations to the effort, as did Howard Wright, the owner of the Seattle Space Needle. The Washington Food Industry Association pledged $30,000. In all, as of last filing, businesses and individuals have pooled a collective $352,775. As No Tax on Jobs hawks its petition, activists try to convince citizens to withhold their signatures, or to withdraw them retroactively.
The outrage it’s inspiring today is particularly potent, but Seattle’s tax is not without precedent. The city levied a similar tax on businesses from 2006 to 2009, before repealing it to stimulate the economy during the Great Recession. Denver already has a head tax of sorts, hitting businesses whose employees earn more than $500 per month with a charge of $4 per employee per month. Chicago aldermen are considering reimposing a city-wide head tax, after mayor Rahm Emanuel phased out the city’s original 1973 version in 2012.
Philadelphia, one of the 20 cities in the running to host Amazon’s second headquarters, is considering a one percent tax on construction, which, like Seattle’s tax, would fund affordable housing. There, according to the Wall Street Journal, opponents are worried specifically about Amazon’s backlash: “This onerous tax proposal at this crucial time essentially tells Amazon that we’re not interested in their business. Dumb,” wrote John Dougherty, business manager of the Philadelphia Building and Construction Trades Council, in a letter to city council.
And California cities—faced with the same coalescing forces of a growing tech industry and the corresponding strain on housing and traffic as Seattle—have begun to seriously consider charging the tech giants per employee, too. San Jose, Redwood City, and Sunnyvale already charge businesses per-employee taxes. Cupertino, home to Apple’s corporate campus, is polling public opinion on reopening a head tax proposal, after one was shut down by business interests in 2016; and on Tuesday night, Mountain View’s city council decided to move forward with polling residents and local business leaders around a per-employee tax of its own. On June 26, they will make a final decision on whether it will appear on the November ballot.
In Seattle, Sawant believes part of the reason businesses are fighting the tax is not only what they have to pay in Seattle, which she deems “pocket change.” It’s that the tax could set a precedent for many other cities to follow. “If we are able to successfully defend this tax this year, and if it begins to collect these revenues and build publicly owned, permanently affordable housing, then there is no doubt that it will set an inspiring example for working people in other cities, most of which are also facing a massive affordable housing crisis,” she said.
John Murray, a representative for No Tax on Jobs, said “everyone agrees” that the homelessness crisis in the city needs to be fixed. They just disagree on whose job it is to do it, and where the funds should come from. “The solution is not to give the city council more money to spend, but to ask them to spend it more responsibly and more efficiently,” he said. He also identifies the homelessness problem as regional, not city-specific, and therefore in need of a more regional solution.
“The genesis of the No Tax on Jobs campaign was two-fold: One, a universal expectation that city council do its job,” he continued. “And two, a real palpable concern in the community that taxing jobs was going to send a message that companies and entrepreneurs and business activity in the city of Seattle was not welcome.”
Drew Herdener, Amazon’s vice president for global corporate and operations communications, echoed the sentiment, telling the Associated Press that the company was “apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”
Local workers, too, have reason to be anxious about those repercussions—that if employers have to pay more for each job, they’ll create fewer of them, or move to cheaper pastures. Already, Amazon could have easily delivered on its promise to withdraw 7,000 construction jobs from downtown site Block 18. (For now, Amazon has confirmed to CityLab that it will be continuing that construction project, but would not comment on the record about its plans for Ranier Square, an office space they had threatened to lease, not occupy, when the bill was still in its planning stages.) Still, Sawant believes the community shouldn’t be swayed by “corporate extortion,” as she calls it.
“Boeing got sweetheart deal after sweetheart deal in the name of, we’ll take jobs away if you don’t give it to us. Every time, [Seattle officials] capitulated to Boeing,” said Sawant. “And we lost jobs anyway! Boeing took them anyway.” That’s the logic of capitalism, she says. (“I know I’m a socialist, but I’m also an economist.”)
Companies believe that the tax punishes the city’s biggest employers, when the city should celebrate the economic stimulus they bring. But the money earned by the tax is meant to offset the negative externalities of that economic and employment stimulus on the city—namely, high housing costs driven up by high earners; congested roads; and widening inequality. If No Tax on Jobs’ hypothesis comes true, and businesses shrink away from Seattle, maybe that in itself will result in another balancing of forces.
A different dynamic in Mountain View?
Mountain View Mayor Leonard Siegel has been watching the fight over Seattle’s head tax closely. But he’s not convinced that the two taxes’ fates are linked: “I think our relationship with our business community is better,” he says. Siegel has been talking about implementing a head tax for the past three years, during which time he’s conducted outreach to field suggestions from local business leaders.
Members of the Chamber of Commerce have expressed “discomfort” but not outright disapproval, and big businesses in the area have begrudgingly requested a three-year phase-in instead of a sudden charge, if a tax has to be levied at all. Three business organizations opposed the business tax outright. But Google, which would incur more than half the city’s tax, has been notably silent, says Siegel. “Google can afford it,” he said. “Google donates a lot for city services anyhow, and they have an interest in seeing that other companies step up.” They’ve been collaborating on a plan to build 10,000 more housing units in the city, and Google has provided $14 million worth of grants to local non-profits. The company has not yet commented publicly on whether it would support or oppose such a tax, and declined to provide a statement to CityLab on the record. A public survey showed that two-thirds of voters would vote for a “general purpose employer tax,” but support was tepid: More people answered “probably yes” than “definitely.”
Tuesday night’s vote solidified unanimous support among the city council, at least, for moving forward on the bill and outlined tentative language, but the details are still subject to change. Unlike Seattle’s tax, for which only the biggest three percent of businesses are eligible, Mountain View’s would be tiered depending on employment size. Small business owners would be charged as little as $9 an employee or a flat rate fee. The biggest fish, Google, would pay $150 per employee per year, but only for employees beyond 5,000.
And while Seattle’s tax is meant to exclusively fund affordable housing and homelessness services, “the bulk of the [Mountain View] money would go to pay for transit projects,” Siegel said, like building an underpass at the railroad tracks and an elevated guideway connecting the downtown transit center with the area near Google’s campus, using autonomous buses. Another 10 or 20 percent would go to fund housing, because although Mountain View has made recent concerted investments in affordable housing, “most of the government programs (like the low-income tax credit) don’t allow us to spend money on the missing middle class,” made up of workers like teachers, he said.
The tax is projected to raise at least $5.9 million annually. While the shortage of housing, prevalence of traffic jams, and lack of transit access are the most urgent issues facing the city, says Siegel, they’re also the biggest threat to their ability to attract and keep businesses. Already, Facebook is expanding its Mountain View presence and the city is going to need money to support that business growth, Siegel says—the question is where that money will come from.
In the event that Seattle’s tax is approved for a referendum in November, the Socialist Alternative party has already planned an extensive door-knocking campaign to persuade voters that businesses should shoulder more of the burden to keep cities affordable. And in the event Durkan and the Council try to repeal the tax through a legislative measure, activists will have appeal to a different group of voters.
“This isn’t just about Seattle,” said Sawant. “It’s really about a more fundamental question: Who has the right to live in our cities?”