June 13, 2018

USA: Seattle Leaders On Tuesday Repealed A 'Head Tax' On Large Companies Such As Amazon And Starbucks After A Backlash From Businesses. Their Solution To Combat A Homelessness Crisis.

The Washington Times
written by Victor Morton
Monday June 11, 2018

That didn’t take long.

Just a month after passing a controversial “head tax” on employees, the Seattle City Council is reportedly considering repealing it.

The Seattle Times reported Monday night that Council President Bruce Harrell “without warning” scheduled a meeting for Tuesday to vote on repealing the $275-per-employee annual tax, with which the city hoped to raise $47 million annually to fund housing and anti-homelessness programs — a move widely praised by progressive activists nationwide.

According to the Times, Mr. Harrell, Mayor Jenny Durkan, and six other council members signaled their support for repealing the tax, which had provoked a furious backlash from businesses such as Amazon.

“Council members said polling and talks with constituents had persuaded them to change course,” the Times reported.

“The people I talk to, whether it’s at the grocery store or coffee shop or basketball game, people do not seem convinced the employee-hours tax strategy is the right solution,” Mr. Harrell told the Times in an interview at City Hall. “I think we have to listen.”

A Tuesday repeal also could have a political-motive angle.

A campaign called No Tax on Jobs was scheduled to submit the needed signatures Tuesday to put a repeal of the “head tax” on the November ballot, a referendum that would have at least the potential of catching council members’ re-election campaigns in the crossfire.
Yahoo News
written by Phuong Le, Associated Press
Tuesday June 12, 2018

SEATTLE (AP) -- Seattle leaders on Tuesday repealed a tax on large companies such as Amazon and Starbucks after a backlash from businesses, a stark reversal from a month ago when the City Council unanimously approved the effort to combat a growing homelessness crisis.

A divided crowd chanted, jeered and booed at the council meeting, drowning out the leaders as they cast a 7-2 vote. People shouted, "Stop the repeal," as others unfurled a large red banner that read, "Tax Amazon." An opposing group held "No tax on jobs" signs.

The vote showed Amazon's ability to aggressively push back on government taxes, especially in its affluent hometown where it's the largest employer with more than 45,000 workers and where some have criticized it for helping cultivate a widening income gap that is pricing lower-income employees out of housing.

The tax was proposed as a progressive revenue source aimed at tackling one of the nation's highest homelessness numbers, a problem that hasn't eased even as city spending grew.

Businesses and residents demanded more accountability on how Seattle funds homelessness and housing and said the city should take a regional approach to the problem. Many worried that Amazon and others would leave the city as the companies sharply criticized the tax.

The online retailer even temporarily halted construction planning on a new high-rise building near its Seattle headquarters in protest. Amazon called the vote "the right decision for the region's economic prosperity."

The company is "deeply committed to being part of the solution to end homelessness in Seattle," Drew Herdener, an Amazon vice president, said in a statement.

City leaders underestimated the frustration and anger from residents, businesses and others over not just a tax increase but also a growing sense that homelessness appears to have gotten worse, not better, despite Seattle spending millions to fight it.

It poured $68 million into the effort last year and plans to spend more this year. The tax would have raised roughly $48 million annually.

But a one-night count in January found more than 12,000 homeless people in Seattle and the surrounding region, a 4 percent increase from the previous year. The region saw 169 homeless deaths in 2017.

Many supporters called the repeal a betrayal and said the tax was a step toward building badly needed affordable housing. They booed council members, imploring them to keep it and fight a coalition of businesses trying to get a referendum overturning the tax on the November ballot.

Several leaders, including three who sponsored the legislation but voted to repeal it, lamented the reversal and conceded they didn't have the resources to fight the referendum.

Councilwoman Lisa Herbold said it "was truly our best option" and that she repealed it with a heavy heart. She lashed out at business interests for blaming the problems on government inefficiencies.

"Gutless!" someone shouted as she explained her rationale. She and others said they didn't want to spend the next several months in a political fight that would do nothing to address urgent needs.

Councilwoman Teresa Mosqueda voted against the repeal, saying the lack of a replacement strategy would mean more months of inaction.

"It was not a tax on jobs," she said, calling it "a much needed down payment to our housing crisis."

Denise Moriguchi, chief financial officer at Asian grocery store chain Uwajimaya, told the council that she doesn't like seeing people living in tents but that the tax was not the answer. She said it would hurt small businesses with thinner profit margins than Amazon.

Seattle's so-called head tax would have charged companies about $275 per full-time worker each year to fund affordable housing and homeless services. It targeted nearly 600 businesses making at least $20 million in gross revenue and would have taken effect next year.

Days after it passed, the business-backed No Tax On Jobs campaign began gathering signatures for the ballot and raised more than $280,000 in cash contributions in just weeks.

It remains to be seen whether Seattle's retreat will have a chilling effect on other cities considering taxes on big tech companies to help mitigate the effects of growth.

The City Council in Mountain View, California, where Google is based, will vote June 26 on whether to put a similar measure before voters in November. The "Google tax" aims to alleviate transportation woes and high housing costs in the Silicon Valley city south of San Francisco.
Seattle Times
written by By Matt Day and Daniel Gilbert
Saturday May 5, 2018

The e-commerce titan and Seattle’s biggest single property-tax payer is on a collision course with a majority of the City Council over the proposed head tax. Amazon has played hardball with plenty of municipalities, but here it’s an unfamiliar turn in the relationship.

Surrounded by jungle plants under a glass-domed ceiling four stories high, Washington and Seattle political leaders got up on a rainy January day to toast Amazon’s success and their hopes for a long-lasting partnership.

The occasion was the opening of the Amazon Spheres, the centerpiece of a $4 billion corporate campus now home to more than 45,000 workers. The spheres, declared King County Executive Dow Constantine, were “a permanent expression of this company’s commitment to Seattle.”

But behind the bonhomie was a simmering tension between Seattle’s largest employer and city officials bent on raising more money to combat homelessness.

Just 93 days later, Amazon delivered a reminder that many of its commitments are not set in stone.

The tension reached full boil last week as Amazon halted planning for one skyscraper and said it would consider subleasing another, pending the outcome of a City Council vote on a tax that would charge large businesses to fund homelessness services and affordable housing.

The move, Amazon’s biggest show of muscle in Seattle civic life, left many with the impression that the company, after adding 40,000 workers to its ranks in the city over the last eight years, might fully halt its growth here — or even reverse course — if the tax went through.

In addition to the direct challenge to its local City Hall, observers say, the unusual public spat sends a message to the 20 regions vying to host Amazon’s second headquarters: Executives at the company, who wove a preference for low taxes into their business, won’t hesitate to curb investment if a local government tries to change the rules. Even in its hometown, Amazon is comfortable playing hardball.

City Council backing

The current flashpoint is Seattle’s head tax, a proposed levy on companies with more than $20 million in revenue. It drew support from a majority of the City Council, and was slated for a full council vote later this month.

Amazon, which had made its opposition to the proposal known to city officials through its policy staff and trade groups, this past week upped the ante. The company halted planning on a 17-story tower on land it owns in its core corporate campus, and floated the idea of subleasing Rainier Square, a downtown skyscraper under construction that the company had previously leased.

Together, the buildings were scheduled to hold about 7,000 employees.

“They clearly want to send a message to City Hall, that we can’t take for granted that the growth we’re experiencing is going to go on endlessly,” said Peter Steinbrueck, a commissioner with the Port of Seattle and former City Council member.

The company declined to comment beyond its earlier statement confirming it had suspended some work pending the vote.

Jon Scholes, president of the Downtown Seattle Association, which works closely with Amazon on city issues, said the company’s workforce of software developers is more mobile than manufacturing-company employees or Boeing engineers.

“I don’t think this is a company that bluffs,” he said.

Bezos’ choice

When he set out to launch his online book-selling startup, Chief Executive Jeff Bezos chose Washington in part for its small population, meaning Amazon could sell goods sales-tax-free to more populous states.

The company, which moved to Seattle in 1995, a year after its founding, became one of the most disruptive forces in business by figuring out how to deliver goods and services more efficiently than anyone else. In the last decade, it came to dominate categories of online retail, and pioneered new businesses in electronics and cloud-computing technology.

At the same time, Amazon has emerged as a disruptive force within its hometown, showering Seattle with about $31 billion spent on its campus and employee salaries over the last eight years. Yet it also has become a byword for a transportation crunch and the skyrocketing cost of living that has deepened the city’s homelessness crisis.

When Amazon announced in September that it was seeking to build a second, “equal” headquarters, roughly the same size as its Seattle base, business and political leaders fretted that a fissure had formed between the city and company. Others were relieved, hoping for a pause in the economic dislocation that has accompanied the boom.

Outside of Seattle, mayors pounced: 238 regions submitted proposals to host Amazon’s HQ2. Many complied with Amazon’s request for tax breaks and other incentives, with several cities offering multibillion-dollar packages.

Largely silent

Supporters of the company point out that Amazon didn’t make similar public requests for funds from Seattle. For most of its first 23 years in Seattle, Amazon was largely silent on city issues, and its primary interactions with officials concerned construction permitting, transit and other issues of interest to a large landowner.

The company wasn’t so hands-off elsewhere.

As part of its effort to resist collecting sales tax on purchases, Amazon repeatedly used the threat of job losses, and the promise of investment, as bargaining chips with state and city governments.

In one episode, Amazon laid off its workers at a warehouse in Texas in 2011 rather than comply with a state determination that it owed $269 million in back sales taxes.

As the company agreed to start collecting sales tax in the following years, it negotiated deals with state governments, sometimes promising jobs and investment in exchange for a tax holiday.

“It’s a core part of their strategy,” said Stacy Mitchell, co-director of the Institute for Local Self Reliance, an advocacy group that has been critical of Amazon. “Asking states and cities for handouts and a competitive advantage.”

Impact unclear

The precise impact of the proposed head tax is unclear.

The levy’s first phase would assess about $500 per full-time employee, per year, a sum that places Amazon’s liability at its current head count at $20 million to $25 million. That changes in 2021, when the tax would convert to a 0.7 percent payroll tax.

By then, the company’s expansion plans — now on hold — would have given Amazon space for at least 55,000 employees, placing the company’s liability at an estimated $43 million, based on an analysis of salary data posted to job site Glassdoor. (That tax burden would rise further if the tax was also applied to employee stock grants.)

During the most recent 12 months, Amazon reported $3.9 billion in net income, and paid $1.2 billion in income tax to governments worldwide.

The overall business-tax burden in Seattle ranks about middle-of-the-pack nationally, according to an analysis by the Anderson Economic Group, which calculated rates based on all state and local taxes paid by businesses as a share of their profits.

But of the 19 U.S. cities and regions selected as finalists for HQ2, 14 are in states estimated to have a lower burden than Washington state, according to the Chicago-based consultancy. Those rates will likely be lower still if Amazon selects one of the cities that has offered large, multiyear tax breaks.

Some suspect that the direct financial impact from Seattle’s proposed tax may be less significant to Amazon than the climate that produced it.

“I wonder whether it is the actual cost of the employee head tax or whether it’s more of having a predictable and business-friendly environment to operate their business in,” Jason Horwitz, a senior consultant at Anderson. The more important factor, he said, “might be the latter.”

Far-reaching effects

For the city of Seattle, whose budget has swelled with the fees generated by the Amazon-fueled development boom, Amazon’s workforce decisions could have far-reaching effects.

Amazon entities are the largest and fifth-largest individual property taxpayers in Seattle, with a combined assessed value of $2.8 billion in 2018, according to city financial filings. Based on the regular tax rate applicable to South Lake Union, where Amazon’s presence is concentrated, those entities alone would have a combined bill of about $27 million, or about 5 percent of all the property taxes Seattle collected in 2016.

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