Sarah Holder is a staff writer at CityLab covering local policy, affordable housing, labor, and technology.
Seattle wants big businesses to fund affordable housing and reduce homelessness. Amazon isn’t happy.
A Seattle proposal to levy an extra “progressive tax” on the city’s biggest businesses has provoked Amazon to halt construction on a new downtown office building. It’s the latest indication that, as cities compete to host Amazon’s second headquarters, the relationship between the company and the home of its first HQ is growing more fraught.
When it comes to Amazon and Seattle, it’s been complicated from the beginning. After the tech giant opened its first headquarters in the city in 2011 (and other companies followed), home prices climbed, driving displacement and increasing rates of homelessness. By implementing this new tax, nicknamed the “Progressive Tax on Business,” the city would theoretically be able to hold companies themselves more accountable for mitigating these effects: The top three percent of the highest grossing businesses would be charged an annual tax of $500 per local employee, and their cash would exclusively fund affordable housing and homelessness initiatives—about $50 million would go to low-income housing (enough to build 750 new units a year), and $20 million to emergency shelter and services. Between 500 and 600 business would be eligible for the tax, including Amazon.
On Wednesday, Amazon Vice President Drew Herdener told the Seattle Times that the company would be pausing all construction on Block 18, a 17-story office building they had planned to open in downtown Seattle, and wouldn’t resume until after the outcome of the city council’s May 14 vote on the bill. And instead of following through on plans to occupy space in another skyscraper, he said the company might sublease the floors to other companies. Amazon confirmed the construction pause to CityLab but declined to add further comment.
In a statement, four members of the city council said “this was never a proposal targeting one company.” They listed McDonalds and Home Depot as other businesses that fit the bill: Big, prosperous Seattle employers whose tax dollars could, in their eyes, contribute more to city services.
“The lack of affordable housing is a crisis for our entire community,” the council members’ statement continued. “Amazon made the conversation about them.”
But Amazon would bear more than a quarter of the total tax burden, according to estimates, and other proponents have been more overt that the company is indeed a target.
“We are not being coy about naming Amazon as one of the culprits,” said Councilmember Kshama Sawant, a member of the Socialist Alternative party and a backer of the bill. “It’s the largest corporation and its footprint of wealth consolidation sort of defies imagination… That’s pocket change for them, and what we can do with it publicly is huge.”
For a corporation that paid no federal income taxes in 2017 (and made $5.6 billion), the tax would be a pretty big blow in the opposite direction. If passed, it’s projected to cost Amazon more than $20 million per year for the next two years; and, based on the high salaries of Amazon’s Seattle workers, their fees would continue to grow if the city switched over to a payroll tax of .7 percent in 2021, as the plan outlines. That all may be pocket change to a company worth over $600 billion, or to a CEO worth more than $100 billion himself. But with other cities scrambling to give away free money for the chance to host Amazon jobs (see: Maryland’s $8.5 billion in tax incentives promised if they win HQ2), it’s not all that surprising the company would balk at handing over extra.
Amazon is not the only business opposing this tax proposal. Already, other business leaders in the community have taken to town halls to protest: “If spending more money was the only answer, we would’ve solved this problem a long time ago,” said Jon Scholes, a representative from the Downtown Seattle Association. The grocery company Safeway and Albertsons said it might need to raise prices, or shut down stores.
When a similar tax was proposed last year it failed early, Sawant says, because of that fear of corporate retaliation, fanned by business interests in the city. “What ends up happening in terms of whether something will get passed or not, it really depends on the balance of forces between ordinary people and big business,” she said. In Seattle, that balance had long been skewed towards the latter. “It’s political blackmail,” she said.
This time, however, the tax, dubbed a “head tax” because it is imposed equally on the cost of every employee, has picked up more steam. Five out of the nine council members back the bill, and the newly elected mayor Jenny Durkan has expressed tepid support.
At a press conference after Amazon’s announcement, Durkan acknowledged that Seattle “must urgently address our homelessness and affordability crisis and lift up those who have been left behind.” But she also noted the very real possibility that angering Amazon would inflict long-term damage on their working relationship, and reduce Seattle’s employment opportunities. The company already employs 45,000 Seattle residents; the halted headquarters addition was predicted to bump that number up, creating 7,000 to 8,000 new jobs. And while Amazon has been credited with jacking up housing prices, it has also offered philanthropic support to homeless shelters in the form of space in their buildings and cash donations. Fighting with Bezos this way has real consequences on a lot of facets of city life, and Seattle knows that.
Seattle and Amazon’s intrinsic, mixed-bag relationship has started inspiring preemptive action for cities competing to host HQ2. There’s been talk among labor organizers in Pittsburgh, Philadelphia, and Chicago about tying economic development contracts to community benefit agreements; of mandating affordable housing construction near developments; and of setting floors on the number of permanent jobs that have to come from within the city itself. But Amazon’s aggressive response to a progressive tax proposal that hasn’t yet been brought to a vote serves as a palpable threat to those other organizers, and another warning for the city that might end up hosting HQ2: Charging Amazon extra to fund city services won’t be easy, whenever you do it. And if you do it too soon, it might break a deal.
That Amazon seems so cowed by a proposal that was once dead on arrival could also be read as a different sort of sign. Anti-Amazon and pro-worker momentum are building, says Sawant. And as more coalitions form, there’s a greater chance big businesses will listen.
“The working people of any one city cannot really win better conditions, better standards of living, or win victory over the might of big business alone,” she said. “Our power lies in linking ourselves with working people in other cities. It’s not only about raising political confidence—it’s about working class victories being contagious.”
Amazon could be bluffing, and resume construction next week. It could use this stand-off as a negotiating tactic, driving down the value of the progressive tax and either ultimately footing a smaller bill or a non-existent one. (Though Councilmember Mike O’Brien, a sponsor of the measure, told the Seattle Times that Amazon hadn’t suggested any specific changes to the bill as of Wednesday, and a spokesperson for Amazon declined to comment on whether they would in the future.) Or, if on May 14 both parties stand their ground, a fight for affordable housing could turn into a longer-lasting struggle between Amazon and its host.