Updated below with Amazon statement.
The Seattle City Council unanimously passed a smaller version of the controversial “head tax” on Amazon and other top-grossing businesses that has sent shockwaves through the tech industry and municipal government over the past few weeks.
FOLLOW-UP: Amazon responds to tax vote: Seattle’s ‘hostile approach and rhetoric … forces us to question our growth here’
At an impassioned meeting Monday afternoon, the Council approved an amendment establishing the tax of $275 per employee per year — down from $500 previously — on companies with more than $20 million in annual revenue in the city.
The tax that passed Monday will raise $45 to $49 million annually to fight the homelessness crisis. The Council’s spending plan allocates 60-70 percent for affordable housing and the remaining funds will go toward shelters and other homeless services
Under the amended tax, Amazon will be on the hook for about $11 million annually, rather than the $20 million that the original proposal would have levied.
Update 5:20 p.m. Amazon issued the following statement from VP Drew Herdener.
We are disappointed by today’s City Council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, 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. 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.
Last week, Amazon said it would resume construction on one of its two paused office towers if the Council approved a $250 per employee tax. That original compromise was voted down Friday.
Today’s amendment was the result of a compromise reached between Mayor Jenny Durkan and several sponsors of the originally proposed tax over the weekend. Under the amendment, the tax expires after five years with the option to renew it. Kshama Sawant was the only councilmember to vote against the amendment, but voted in support of the final tax after the amendment was added by her colleagues.
When asked about Amazon’s negative reaction to the response at a press conference following the City Council vote, Durkan said she stands by the legislation.
“I am quite confident that as we move forward, we can continue to have the best city anywhere for people to do business … this is the city where their workers are going to want to be and that’s why they’re going to want to be here,” she said.
The head tax has ignited something of an existential debate for Seattle over its monumental growth. With more than 40,000 employees and counting, Amazon is at the center of the conversation and the explicit target of Sawant, who has called the proposal “Tax Amazon Legislation.”
“Big businesses like Amazon have many tactics to avoid paying their fair share of taxes, and it has required true dedication and sacrifice from hundreds of us to bring us to this point. … If we had a stronger movement, that could have changed the balance of power between us and the goliaths even more, we could have won more,” Sawant said Monday. “If we had a weaker movement, we could have won less or even nothing.”
Two weeks ago, Amazon responded in kind, threatening to slow its growth in Seattle pending the City Council’s vote on the tax. The e-commerce giant paused construction on one of its office towers and said it is reconsidering occupying another. The combined projects would house 7,000 new employees. Amazon will resume construction on the Block 18 building but is still weighing whether or not it will occupy the massive Rainier Square office tower that’s underway.
“When we start talking about changing that system that benefits some to make it more fair, there’s a lot of resistance,” Councilmember Mike O’Brien said during Monday’s meeting. “We have a lot more work to do.”
The city’s homeless population is growing, behind only New York and Los Angeles. With it, frustration over the City Council’s response to the homeless crisis grows. A recent audit of King County’s response to the crisis gives weight to that view. It found that a lack of coordination between Seattle, surrounding cities, and the county creates inefficiency in the region’s homeless response.
Related: Seattle’s proposed ‘Amazon tax’ would also hit Facebook, Google and other out-of-town tech titans
“I think we have to convince the public that we’re using [funds] wisely and strategically, and I think we’ve failed in that regard as a city,” said Council President Bruce Harrell during Monday’s meeting.
But the city says homelessness is a moving target. Although more than 12,000 affordable units have been built, far more are necessary to house the growing population of people displaced by rising housing costs, which are bid up by an influx of well-paid tech workers and exacerbated by widespread single-family zoning. A new report concluded that it would require about $400 million a year, conservatively, to solve the homelessness crisis in King County.
“This compromise might make the council feel good, but it doesn’t address our root concern,” said Michael Schutzler, CEO of the Washington Technology Industry Association, in a statement after the vote. “There is no accountability for the current expenditure on homeless services. As a result, there is no clear rationale why investing $50 million more in shelter housing is better than $50 million in medical services — or any other service for that matter.”
Mayor Jenny Durkan said that Seattle currently spends about $70 million in annual direct investments to programs that fight homelessness in her first State of the City address. Other estimates put that number at about $54 million in 2017.
“We appreciate Mayor Durkan’s efforts to significantly modify the Council’s ill-conceived proposal to tax jobs in Seattle,” said Downtown Seattle Association CEO Jon Scholes in a statement, after Durkan introduced her original compromise last week. “A tax on jobs at any level is bad economic policy and will negatively impact Seattle’s economy and city tax revenues.”
Amazon says it has contributed a cumulative total of $40 million to Seattle’s affordable housing fund through fees associated with its real estate development in the city. Separately, the company has committed more than $40 million to two groups: the Mary’s Place shelters for homeless families, including space in company buildings; and the FareStart non-profit organization for homeless and disadvantaged men, women, and kids, including space and equipment for FareStart restaurants.