Seattle is an innovator in a lot of things — from speciality coffee to cloud computing to commercial spacecraft.
Could that innovation now spread to municipal tax codes?
Seattle last week gained national attention after the City Council passed a so-called “head tax,” which levies a $275 tax per employee per year on companies with annual revenue of $20 million or more. The controversial tax, which would raise about $45 to $49 million, was applauded by affordable housing advocates, but criticized by members of the business and tech community, arguing that it amounts to a tax on jobs.
Now, the concept of taxing big corporations — in an effort to build affordable housing and offer homeless services — is catching on Silicon Valley.
Bloomberg’s Eric Newcomer reports that San Francisco, Mountain View, Cupertino and East Palo Alto are now considering similar taxes to the legislation passed in Seattle, potentially changing the dynamic between big tech companies and the communities in which they operate.
“Google has billions of dollars in cash floating around,” Mountain View mayor Lenny Siegel told Bloomberg. “They made billions off the tax bill. They can afford to spend a little more here.”
Google is headquartered in Mountain View, but also maintains a sizable operation in the Seattle area, with engineering offices in Kirkland (not subject to the head tax) and Seattle’s Fremont neighborhood (subject to the head tax). It has a market value of $746 billion.
Mountain View is considering a head tax of $250 to $300 per employee, with Bloomberg reporting that the city council is considering a vote for next month. It would raise about $10 million. Cupertino — home to Apple’s headquarters — also is considering a head tax to fund housing and transportation, as is East Palo Alto, which just voted to send the measure to voters this November.
The news comes as some tech giants expand their operations in new enclaves outside of Seattle and Silicon Valley. Apple is rumored to be looking at northern Virginia and North Carolina for a new facility to help house some of its workers.
Meanwhile, Amazon is expanding in places like Boston and Vancouver, B.C., and also is considering 20 North American cities — including Pittsburgh, Austin and Washington D.C. for its secondary headquarters — known as HQ2. Amazon plans to consider tax incentives for the city it chooses for its secondary home.
In Seattle, Amazon called the head tax — which has often being labeled an “Amazon tax” since the giant employer would foot a big part of the bill — disappointing.
“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,” Amazon wrote in a statement after the head tax was passed. “City of Seattle revenues have grown dramatically from $2.8B in 2010 to $4.2B in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem – it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better.”
Business groups in Seattle are now fighting to repeal the head tax, including Amazon, Starbucks and Paul Allen’s Vulcan. They each have donated $25,000 to an effort to repeal the head tax, with the money going to the “No Tax on Jobs” campaign, an effort to get a referendum on the November ballot that would give voters the option to reel back the tax.