Seattle Just Showed How to Rein In Amazon—And the Company Is Going to War

Daniel Moattar

The lawsuit charges Amazon and Amazon Logistics Inc. with violating the minimum wage law in Seattle, state labor law in Washington and the federal Fair Labor Standards Act. (soumit/ Flickr)

While cities across the coun­try line up to show­er Ama­zon with bil­lions of dol­lars in tax breaks and free office space, the Seat­tle City Coun­cil just hit the tech and retail giant — and the city’s biggest firm — with a new tax meant to fight home­less­ness and fund afford­able housing.

At a packed and at times com­bat­ive meet­ing on Mon­day, after mul­ti­ple rounds of last-minute nego­ti­a­tions, the Coun­cil unan­i­mous­ly passed an amend­ed ver­sion of the Employ­ee Hours Tax (EHT), which will effec­tive­ly serve as a pay­roll tax on Seattle’s mega­cor­po­ra­tions. The pas­sage is a major vic­to­ry for pro­gres­sives in the city, includ­ing coun­cilmem­ber Kshama Sawant, who strong­ly backed the cor­po­rate tax.

The EHT, wide­ly known as the head tax,” is aimed at busi­ness­es with more than $20 mil­lion in year­ly receipts — i.e., the rich­est three per­cent of cor­po­ra­tions in Seat­tle, includ­ing Ama­zon. Those com­pa­nies will now be taxed $275 per work­er, annu­al­ly, down from an orig­i­nal­ly pro­posed cap of $500 per work­er. The tax is expect­ed to raise about $48 mil­lion per year, funds to be spent on sub­si­dies for afford­able hous­ing and resources for the city’s grow­ing home­less population.

But Ama­zon is strik­ing back. On May 2, the com­pa­ny announced that, until the vote was decid­ed, it would call off all work on a 400,000-square-foot office block being built north of down­town Seat­tle — a threat the com­pa­ny dropped just after the new tax passed. Ama­zon still claims to be eval­u­at­ing options” to sub­lease anoth­er 700,000-plus square feet it has leased in a sky­scraper cur­rent­ly under con­struc­tion down­town. In a state­ment released after the vote, Ama­zon said, 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.” The com­pa­ny con­trols near­ly a fifth of Seattle’s office space, an unpar­al­leled fig­ure among major Amer­i­can cities.

It is very dif­fi­cult to take seri­ous­ly a threat that essen­tial­ly boils down to, If you don’t con­tin­ue to pro­vide a rich­ly sub­si­dized oper­at­ing envi­ron­ment for the rich­est cor­po­ra­tions and their high­ly paid employ­ees, we will leave you,’ says Ali­son Eisinger, exec­u­tive direc­tor of the Seattle/​King Coun­ty Coali­tion on Home­less­ness. That is not cor­po­rate cit­i­zen­ship as I under­stand it.”

Beyond Ama­zon

The orig­i­nal EHT leg­is­la­tion was more ambi­tious, and would have brought in about $75 mil­lion per year. But pri­or to Mon­day, Seat­tle may­or Jen­ny Durkan indi­cat­ed that she would veto the tax, forc­ing the major­i­ty back to the bar­gain­ing table. Durkan’s 2017 may­oral cam­paign fea­tured heavy sup­port from Seattle’s Cham­ber of Com­merce — par­tic­u­lar­ly from Ama­zon, which donat­ed $350,000 to a group back­ing her cam­paign. The final ver­sion, passed by the Coun­cil 9 – 0, had a veto-proff major­i­ty, assur­ing it will become law. 

As soon as we saw that Ama­zon was look­ing for loca­tions in oth­er cities,” says Sawant, our politi­cians sent a craven let­ter to Ama­zon say­ing, We’re so sor­ry you felt unwel­come — let’s hit the refresh button.’”

When was the last time strug­gling renters got a let­ter from their city,” she asked, say­ing, We’re so sor­ry you felt unwel­come! We’ll work to get you afford­able housing?’”

Wash­ing­ton, despite its lib­er­al rep­u­ta­tion, is already a low-tax state. It has no per­son­al income tax, no cor­po­rate income tax, and leans heav­i­ly on its rel­a­tive­ly low sales tax. Accord­ing to the Insti­tute on Tax­a­tion and Eco­nom­ic Pol­i­cy, a non-par­ti­san think tank, Wash­ing­to­ni­ans live under the country’s most regres­sive tax régime.

Our state is woe­ful­ly behind in being able to secure rev­enue in a way that can meet our basic needs,” Eisinger says. She empha­sized that — although Ama­zon is in the spot­light — there is much more to the debate than the company’s retaliation.

This is not about Ama­zon,” Eisinger says. Ama­zon has suc­ceed­ed, in a rather ill-con­ceived way in mak­ing it large­ly about them. But the idea is that the biggest busi­ness­es should be able to put a very mod­est por­tion of their prof­its toward address­ing a crit­i­cal and des­per­ate­ly under­fund­ed com­mu­ni­ty need, so that this com­mu­ni­ty is bet­ter for their employ­ees and their customers.”

Untaxed state income is a rev­enue loss for Wash­ing­ton, but a win for Seattle’s legions of tech work­ers, who are some of the best paid nation­wide. Thanks to firms like Ama­zon, where soft­ware engi­neers’ start­ing salaries are typ­i­cal­ly in the six fig­ures, Seat­tle is see­ing some of the nation’s fastest wage growth — but almost all in high-dol­lar jobs.

Unlike most U.S. tech giants, Ama­zon is head­quar­tered in a major metrop­o­lis, count­ing on its infra­struc­ture, and the ameni­ties of city life, to attract top tal­ent. Ama­zon made a very con­scious deci­sion” to use the city as a draw, its vice pres­i­dent for real estate told the Seat­tle Times.

Oth­er star­tups-turned-giants are fol­low­ing suit. Google, Face­book, Groupon, Uber, Airbnb and oth­er firms have set up shop in Seat­tle — bring­ing in high-val­ue jobs, but using a grow­ing share of the city’s infra­struc­ture. The city has had to add bus­es to one tran­sit route part­ly to accom­mo­date Amazon’s hun­dreds of sum­mer interns, and some small­er com­pa­nies com­plain that it’s increas­ing­ly hard to rent office space when own­ers can hold out for Ama­zon or oth­er huge firms to lease whole floors or buildings.

The hous­ing problem

Above all, the prob­lem is hous­ing. Seattle’s rents are up 65 per­cent since 2010, and rose 30 per­cent from 2014 to 2017 alone, due in part to demand from tech hires. Ama­zon is behind the biggest rent increase last year,” read a Feb­ru­ary Mar­ket­Watch head­line on rent hikes in near­by Tacoma

Mean­while, demand for sin­gle-fam­i­ly homes has pushed aver­age house prices close to $1 mil­lion. Forty per­cent of Seat­tle homes now sell at or above that price. And — fur­ther rais­ing rents — high home prices are dri­ving more fam­i­lies into the rental mar­ket, with Seat­tle now on the verge of becom­ing a major­i­ty-renter city.

I’m a native Seat­tleite, and Ama­zon has had a huge impact,” says Kate­lyn Mor­gaine. Mor­gaine is a case man­ag­er at Down­town Emer­gency Ser­vice Cen­ter, an orga­ni­za­tion serv­ing Seattle’s home­less. None of my cowork­ers can afford mar­ket-rate rent,” she says. We’re liv­ing on top of each oth­er in apart­ments or wher­ev­er we can.” Mor­gaine claims that some of her cowork­ers live in pub­licly sub­si­dized build­ings right next to their clients.”

More than nine­ty per­cent of homes now being built in Seat­tle will be rentals, but with the influx of six-fig­ure jobs, devel­op­ers may have lit­tle incen­tive to build tens of thou­sands of units of afford­able hous­ing. And Seat­tle lacks the exten­sive ten­ant pro­tec­tions of cities like New York, where renters have long been the major­i­ty. Seattle’s City Coun­cil has yet to over­turn Washington’s state ban on rent control.

The cri­sis has been espe­cial­ly tough on work­ing-class and poor Seat­tleites. An analy­sis by salary com­par­i­son site PayScale found that a typ­i­cal Seat­tle retail work­er would end the year $11,000 in debt after pay­ing for their basic needs. A typ­i­cal tech work­er, on the oth­er hand, would end up with near­ly $60,000 in dis­cre­tionary income.

We are not opposed in any way to the tech work­ers, who actu­al­ly do the work that gen­er­ates all of Amazon’s prof­its,” Sawant says. We don’t begrudge any part of the work­ing class mak­ing a decent stan­dard of liv­ing. But one of the ways in which Ama­zon changes the land­scape of the econ­o­my is by the fact that, except for the tech work­ers, the oth­er work­ers who keep Amazon’s cam­pus­es run­ning make very, very low wages.”

In 2015, Seat­tle leg­is­lat­ed a min­i­mum wage hike, which will reach $15 per hour for all work­ers in 2021. But medi­an rent increas­es have matched or out­paced min­i­mum wage hikes, mean­ing that the lion’s share of many min­i­mum-wage work­ers’ rais­es has gone to their land­lords.

Home­less­ness has spiked to match. King Coun­ty, where Seat­tle is locat­ed, sits behind only New York and Los Ange­les for total num­ber of home­less res­i­dents, although the coun­ty ranks 13th nation­wide for pop­u­la­tion. Almost a quar­ter of home­less Seat­tleites have cit­ed hous­ing afford­abil­i­ty as the main rea­son they were homeless.

What is vis­i­ble is a real­ly close cor­re­la­tion in the increas­es in rent and the increase in the num­ber of peo­ple who are home­less,” Eisinger said, cit­ing a recent McK­in­sey & Com­pa­ny report on home­less­ness in King County.

Oth­er cities with tech booms have seen sim­i­lar prob­lems. In Cal­i­for­nia, San Fran­cis­co and San Jose have also seen chart-top­ping gains in medi­an wages — like in Seat­tle, the gains are con­cen­trat­ed among high earn­ers — along with mas­sive hous­ing short­ages and out-of-con­trol rent spikes.

As in Wash­ing­ton, California’s state lim­its on rent con­trol mean cities’ hands are tied, for now, on the price front. But a pro­gres­sive cor­po­rate pay­roll tax in tech-dense cities opens the door to pro­vid­ing new afford­able hous­ing, shel­ters, and ser­vices for home­less and at-risk residents.

This hous­ing cri­sis did not hap­pen in one day,” Sawant says. It hap­pened not only because of neg­li­gence on the part of the city, but because of a very clear ori­en­ta­tion toward what ben­e­fits corporations.”

Tax free

Ama­zon paid no fed­er­al tax­es in 2017, and expects a tax break of near­ly $800 mil­lion from the new GOP tax law. In Wash­ing­ton, the company’s state and local tax bur­den of $250 mil­lion rep­re­sents about eight per­cent of net prof­its — or about one-tenth of one per­cent of last year’s rev­enue. The Employ­ee Hours Tax would bump Amazon’s state and local tax bill to about $260 million.

In oth­er words, the cash val­ue of the tax is a drop in the buck­et — com­pared not just to Amazon’s exist­ing tax bur­den but to its sav­ings under the new tax code. But the tax fight might be an impor­tant one for Seattle’s favorite megacorporation.

Almost every­thing that we val­ue and need in our state is paid for by prop­er­ty and sales tax,” says Eisinger. We have very few options at the local lev­el for bring­ing in rev­enue any oth­er way.” That arrange­ment, she points out — along with nat­ur­al beau­ty, qual­i­ty health­care, arts and cul­ture, and a large research uni­ver­si­ty — is a draw for large companies.

The pop­u­lar blow­back to new prop­er­ty and sales tax­es is well doc­u­ment­ed. If the law pass­es, Seattle’s politi­cians might find that tax­ing eight-fig­ure cor­po­ra­tions is less polit­i­cal­ly risky, in the long run, than tax­ing shop­pers or homeowners.

For com­pa­nies tak­ing advan­tage of exist­ing city infra­struc­ture — or, in the case of Amazon’s HQ2, seek­ing mas­sive, cus­tom-made pub­lic sub­si­dies—a local tax revolt against large cor­po­ra­tions would be bad news.

The rea­son there’s nation­al atten­tion on this,” Sawant says, is that I think this will be a bell­wether for oth­er cities, like $15 dol­lars an hour.” The Fight for 15’s vic­to­ries in the Seat­tle area helped dri­ve the move­ment into nation­al head­lines, reshap­ing the nation­al debate on wages.

Just in Novem­ber of last year,” she says, the major­i­ty of the City Coun­cil vot­ed no on a sim­i­lar tax. It shows you in a very direct and live man­ner what you can achieve by build­ing a movement.”

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