State Watch

Seattle reverses course on business tax after Amazon pressure

Just weeks after passing a new tax on big businesses, Seattle political leaders signaled late Monday they would reverse course and repeal it.

Mayor Jenny Durkan and city council President Bruce Harrell said in statements that they would end the tax, initially meant to combat rising homelessness in a city where housing prices have soared.

{mosads}“We heard you,” Durkan and seven of the nine city council members said in a statement. “This week, the City Council is moving forward with the consideration of legislation to repeal the current tax on large businesses to address the homelessness crisis.”

Business groups, led by the city’s largest employers like Amazon and Starbucks, had raised $200,000 in just a few weeks to gather signatures for a referendum challenging the new tax. They had planned to submit those signatures on Tuesday in an effort to place the referendum on the November ballot.

“The announcement from Mayor Durkan and the City Council is the breath of fresh air Seattle needs,” said Marilyn Strickland, who heads the Seattle Metro Chamber of Commerce. “Repealing the tax on jobs gives our region the chance to address homelessness in a productive, focused and unified way.”

The tax would have fallen on businesses that generated more than $20 million in revenue. The 585 businesses in the city that qualified would have faced a $275-per-employee tax, money that would have gone to pay for affordable housing and programs aimed at curbing homelessness.

A study commissioned by the Chamber of Commerce, however, found the tax would have cost Seattle about 14,300 jobs and $3.5 billion in economic output. The council expected the head tax to raise $47 million in revenue.

Several big businesses, led by Amazon, which employs 45,000 workers in Seattle, objected to the tax. Amazon put a hold on projects that would have added another 7,000 new jobs in the city, and began exploring options to sublease thousands of square feet of downtown office space.

Angry constituents also shouted down city council members at a public forum, a shocking departure for a city known for its cordial politics. At a rally meant to back the tax at Amazon’s headquarters, construction workers shouted down a pro-tax member of the city council.

City council member Lorena Gonzalez, who said she would vote to overturn the tax, pinned the blame on the business community.

“I am deeply troubled and disappointed by the political tactics utilized by a powerful faction of corporations that seem to prioritize corporations over people,” Gonzalez said in a statement. “It was my sound belief that a compromise on this policy had been reached with business, and as an elected official representing all of Seattle, I am deeply disappointed that certain members of the business community did not engage in good faith with the City of Seattle.”

The decision to reverse the tax came together over the weekend, in conversations between Durkan and Harrell.

Kshama Sawant, the most liberal member of the council, called the decision a “backroom betrayal.”

The pressure brought to bear by Amazon raised eyebrows among cities vying to compete for the company’s massive HQ2 project. The 20 finalists have offered billions in incentives to attract the project, which the company says will ultimately bring 50,000 high-paying jobs to a region.

But along with those new jobs will come a company that is increasingly willing to flex its political muscles.

“I think this is problematic enough and Amazon has shown enough troubling behavior that I would drop out” of the running for HQ2, said Richard Florida, an urban expert at the University of Toronto’s Martin Prosperity Institute. “If you’re smart, you certainly wouldn’t offer incentives to a company that’s going to squeeze you.”

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