Three days after the Seattle City Council passed a head tax on large businesses, the editorial board of The Pittsburgh Post-Gazette, thousands of miles away, made the extraordinary decision to weigh in on an issue that would typically be confined to local interest in the Pacific Northwest.
On May 17, the paper published a scathing criticism of Seattle’s head tax, comparing the city to a bank robber targeting Amazon for no better reason than that’s where the money is. The Gazette’s editors slammed Seattle for taxing big business without a plan and taking the wrong approach to housing market failures.
“Seattle is prosperous because of the enterprises it is now waging war on,” the editorial said. “Amazon, take note: This will not happen in Pittsburgh.”
Pittsburgh is one of 20 cities tracking Seattle’s head tax closely, as they compete for Amazon’s second headquarters, a massive economic development project promising to bring 50,000 high-paying jobs to the winning city. Elected officials, economists, and community leaders in cities vying for Amazon HQ2 are watching and weighing in on the controversial new tax. Whether they see Amazon’s heated battle with its hometown as a cautionary tale or a chance to gain from Seattle’s loss is a matter of perspective.
Their impressions of Amazon’s hardline approach to the tax range from apprehension to derision to schadenfreude. Some consider the clash a sign that Amazon will invest more heavily in its second home while others fear a future in which Amazon plays hardball with their city.
Two weeks ago, the Seattle City Council passed the highest head tax in the nation to build more affordable homes and fund homeless services in an effort to quell a growing housing crisis. Seattle businesses with more than $20 million in annual revenue will be required to pay about $275 per full-time employee, per year under the tax. The most ardent supporters called it an “Amazon tax” because the e-commerce giant will be one of the hardest-hit companies. The legislation met fierce opposition from the tech industry. It ignited weeks of heated debate over how Seattle should deal with its growing pains and whether the City Council was a responsible steward of taxpayer dollars.
Things escalated two weeks before the vote, when Amazon paused construction on one of its Seattle office towers and said it was reconsidering moving into another massive development “pending the outcome” of the head tax debate.
After Amazon’s announcement, Seattle Mayor Jenny Durkan worked with the Council on a compromise, eventually slashing the price per-employee from $500 to the $275 that made it across the finish line. Durkan signed the tax into law but a referendum campaign could give voters the opportunity to overturn it in November. Amazon resumed one of the development projects but issued a biting rebuke to the City Council. The company said it is “very apprehensive” about its future in Seattle because of the city’s “hostile approach and rhetoric toward larger businesses.”
The day of the vote, elected officials in cities across the country — including HQ2 contenders Austin, Dallas, Boston, Chicago, Denver, New York City, Washington, D.C., Los Angeles, and Miami — signed an open letter urging the Seattle City Council to move forward with the tax, despite Amazon’s threats.
“By threatening Seattle over this tax, Amazon is sending a message to all of our cities: we play by our own rules,” the letter says. “But we have our own message: we thank Seattle’s leaders and residents for their effort to create a more equitable city.”
Indianapolis City Councilmember Jared Evans didn’t sign the letter but he did echo its sentiments in an interview with GeekWire.
He said Amazon “is so large, they’re now basically holding cities hostage to give in to the tax incentives or give in to not raising their taxes to keep the jobs or to get future growth.”
One of several preferences Amazon outlined in its HQ2 request for proposals is government incentives. The request is controversial among many scholars and urbanists. Richard Florida, a University of Toronto professor and author, has been one of the most outspoken critics of Amazon’s appetite for incentives and efforts to block Seattle’s head tax. He told The Hill Amazon’s behavior is so troubling, he would urge Toronto and other cities in the running for HQ2 to drop out.
“If you’re smart, you certainly wouldn’t offer incentives to a company that’s going to squeeze you,” he said.
Evans still isn’t sure whether he wants Indianapolis to win the HQ2 contest. He did call for more transparency in the bidding process so that citizens can understand what is being offered to Amazon. Many cities, including Indianapolis, are keeping a tight lid on details of their proposals.
“I think Seattle needs to hold steadfast and they need to continue to invest in their citizens,” Evans said. “Every city should really be appalled by what’s happening because you never know when you’re going to be in a position that you may have to increase taxes to pay for some sort of city service.”
Although plenty of people are appalled, not everyone’s indignation is directed at Amazon.
The Pittsburgh Post-Gazette editors aren’t the only representatives of HQ2 cities to issue sharp criticisms of Seattle’s head tax plan. Other cities are also selling themselves as business-friendly alternatives to Seattle. Cities in Texas are promoting the fact that the state has no income tax. It’s not a bad tact; Amazon CEO Jeff Bezos chose to launch the company in Washington, in part, because it also has no income tax.
Austin and Dallas are both in the running for HQ2. Stephen Lusch, an assistant professor at Texas Christian University, told The Dallas Business Journal that “the recent activity in Seattle could make Amazon a bit more cognizant of the tax environment of the cities vying for HQ2.” Southern Methodist University’s Mike Davis called the tax “economic illiteracy on the part of Seattle.”
Seattle’s head tax goes farther than other cities have dared but it isn’t the first time a municipal government has tried to raise funds from big business.
Chicago is one of the few cities on the HQ2 short list that used to have a head tax. The city charged large employers a $4 per-month tax per employee. Chicago Mayor Rahm Emanuel eliminated the tax in 2014, calling it a “job killer.”
“We have been following the fight over the Seattle head tax closely,” said Nathan Ryan, a Chicago-based political organizer with Grassroots Collaborative. “Chicago has seen the consequences of what happens when we give wealthy executives like Jeff Bezos a free ride. When Mayor Emanuel became mayor in 2011 he eliminated the Chicago head tax and the communities we represent have brunt the consequences of that in the form of over 50 closed public schools, shuttering of the city mental health clinics, and skyrocketing violence.”
Denver’s head tax is still intact. Companies pay $48 per year for each employee making more than $500 a month.
Contenders for Amazon HQ2 aren’t the only cities watching Seattle’s head tax saga unfold. Elected officials in the tech epicenter Silicon Valley are considering following Seattle’s lead. San Francisco, Mountain View, Cupertino, and East Palo Alto are considering similar taxes on big companies to mitigate the consequences of boom times.
In Seattle, the head tax battle lives on. A coalition of businesses is running a campaign to include a referendum on the legislation in the November ballot. They need 17,000 signatures of support by mid-June to move forward with the plan. Amazon has donated $25,000 to the campaign.