Amazon halts Seattle construction amid head tax proposal

SEATTLE — Amazon fired a warning shot Wednesday over a plan at Seattle City Hall to tax big businesses $500 for each worker.

The company said it has halted construction planning for a new building at 7th and Blanchard and is exploring options to sublease space to another company in a tower being built at Rainier Square that Amazon planned to occupy itself.

The two projects would provide space for 7,000 new Amazon workers.

Four Seattle City Councilmembers have proposed an employee hours tax to raise money for affordable housing and emergency services for the homeless.

"We have to act with urgency, folks are dying right now," council member Teresa Mosqueda said Wednesday at a city council meeting.

The tax would apply to just under 600 businesses with revenues of more than $20 million.

Amazon, with an estimated 40,000 Seattle workers, would pay $20 million.

The company is already looking elsewhere for a second headquarters, and this week announced 3,000 new jobs in Vancouver, BC and 2,000 in Boston.

"I'm concerned about these jobs. I want to know, if Amazon takes 2,000, 3,000 people to Vancouver, what the impact's going to be," said Seattle council member Sally Bagshaw.

Bagshaw is not a sponsor of the head tax plan, but says the city must find ways to address the housing crisis.

"There are good arguments on both sides. We want to have more housing, definitely that's something that we need but we have to work this out so it is smart," Bagshaw said.

In a statement, the four council members proposing a head tax, Mike O'Brien, Teresa Mosqueda, M. Lorena Gonzalez and Lisa Herbold, wrote: "This was never a proposal targeting one company, but Amazon made the conversation about them when they expressed their intentions to pause construction on their new office tower pending a vote on our Progressive Tax on Business. The company recently reported record-breaking profits of nearly $2 billion dollars in one quarter."

You can read the full response from the council members at the bottom of this story.

An employee hours tax would also affect businesses much smaller than Amazon.

The Essential Baking Company employs about 350 people baking bread in Georgetown.

"We're in the food business and in the food business the margins are pretty tight," said President and CEO Tom Campanile.

He says his company, which now pays about $250,000 in business and occupation taxes, would pay an additional $250,000 in a head tax.

He says the company might have to cut back or consider leaving Seattle if the head tax is approved.

"We want to produce here in Seattle but it seems like the city is making it harder and harder for us to survive," Campanile said.

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Amazon and Seattle's head tax
The news comes a couple of months after some local leaders attempted to "hit the refresh button" on the city's relationship with Amazon. But as the council pursues a new tax on large companies like Amazon, the online retailer appears to be hitting the pause button on Seattle.

Council members are attempting to raise more money to spend on the region’s affordability and homelessness crises by implementing an employee hours tax, aka a head tax. The success of large tech companies like Amazon — drawing highly-paid employees to the area — has been pointed to as one reason that the region’s affordability problem has exploded.

The current proposal is to tax employers 26 cents per employee, per hour. The city will shift to a payroll tax in 2021. It aims to raise $75 million annually. The council could vote on the proposal as early as May 14.

Meanwhile, Amazon continues to make investments outside of Seattle. Earlier this week, the company announced it will expand operations in Vancouver B.C. with a new 416,000-square-foot office building, allowing the company to add 3,000 new jobs. The Vancouver announcement received a warm welcome from Canadian leaders, drawing Prime Minister Justin Trudeau to the event. Trudeau said "…companies like Amazon are bringing even more energy, vision – and thousands of good jobs – to Canada. We are proud to champion these companies."

A day later, Amazon announced it will add 2,000 jobs in Boston as it expands the tech hub there.

The company also plans to expand into a second headquarters — HQ2 — equal to that of its Seattle location. That new location will add up to 50,000 new jobs to whatever city it lands in. The search for a new city is still on. No Washington cities made it onto the list of finalists, despite the Puget Sound region's counties and cities coming together to offer the company locations for the second headquarters.

Seattle leaders respond
Hours after news broke of Amazon halting its headquarters construction, Seattle city leaders began to respond.

“I’m deeply concerned about the impact this decision will have on a large range of jobs – from our building trades, to restaurant workers, to nurses, manufacturing jobs and tech workers,” said Mayor Jenny Durkan. “At the same time, our city must urgently address our homelessness and affordability crisis and lift up those who have been left behind. I fundamentally believe we can do both by working together. In the upcoming days, I will be bringing together council members as well as business, labor and our community leaders to work together to see how we might forge common ground in dealing with our challenges while keeping jobs.”

Councilmember Kshama Sawant pointed out that the council voted to approve a $1.7 billion “vanity project” for hotels through the convention center expansion. That money could have been used for affordable housing, she said. She would like the council to go beyond the proposed $75 million head tax revenue and get $150 million.

“I think we should hold the council’s feet to the fire to pass $150 million for affordable housing,” Sawant said.

She speculated that Amazon could be on the hook for $20 million a year under the head tax, and that “Amazon is perfectly capable to paying that, and double, and even four times that amount.” Sawant said that Trump’s tax cuts have given Amazon a $789 million “windfall” and that could pay for Seattle’s head tax over 40 years.

Councilmember Sally Bagshaw said that the council has been hearing from local labor unions about fears they will be losing construction jobs if Amazon halts its plans in Seattle.

Growing Seattle
The city council has recently doubled the money spent on homelessness and has spent $1 billion on the issue over the past 20 years, according to the Times. The crisis persists. Seattle currently spends about $200 million annually on homelessness and affordability.

The Times speculates that Amazon could be halting construction as a "political maneuver" to fight back against the head tax. Whatever the motivation, the news could radiate through the local economy, affecting housing and development.

Seattle Councilmembers M. Lorena González, Lisa Herbold, Teresa Mosqueda and Mike O’Brien issued the following statement in response to Amazon's “construction pause”:

“Collectively we – the primary sponsors of the business tax currently being discussed in Council –  represent 750,000 people who call Seattle home.
 
“Under our plan, called the Progressive Tax on Business, $75 million would be generated annually from approximately 585 of the City’s largest businesses, with three-quarters of that going toward additional affordable housing.
 
“This was never a proposal targeting one company, but Amazon made the conversation about them when they expressed their intentions to pause construction on their new office tower pending a vote on our Progressive Tax on Business. 
 
“The company recently reported record-breaking profits of nearly $2 billion dollars in one quarter.
 
“We estimate that under our plan, Amazon would pay about $20 million annually toward this new tax.
 
“The lack of affordable housing is a crisis for our entire community. We simply don’t have the revenue necessary to fill the gap. Why? In large part it’s thanks to Washington’s upside-down tax code that puts an inequitable accumulation of wealth ahead of the needs of everyday people.  This is what leads to greater and greater income disparity.  Not only does Washington State have the most regressive tax structure in the nation, but Seattle’s taxation is the most regressive in the state. The cost of providing services to a City that has grown by 100,000 people in the last 10 years, in a region that continues to grow by 1,000 people a week, is vastly outpacing our revenue in this booming economy.
 
“Seattle has become the nation’s biggest company town. We’ve shifted to a service-based economy; only a handful of services are taxed, and they are virtually all provided by blue-collar workers. Washington State doesn’t tax income or capital gains, and at the city level, we’re left with very few options to raise the resources we need.
 
“Our charter requires us, as elected officials - as a city, to protect and enhance the general welfare of people.  We’ve added hundreds of new shelter spaces in the last couple years and moved more than 3,000 people out of homelessness and into permanent housing just last year, yet more than 3,800 people sleep outside in Seattle every night.  Thousands more compete for shelter and temporary housing. We have an opportunity to treat Seattle residents humanely and with dignity.
 
“Many employees of large businesses in Seattle are paid so little that their families qualify for state-funded Medicaid. Whether it’s Amazon (~1,100 employees across Washington - costing the state over $7.5 million per year,) McDonalds (~3,900 WA employees costing $17 million per year) or Home Depot (~1,200 WA employees costing $7.4 million per year), big business often leaves many people behind and expects taxpayers to pick up the bill.
 
“While Amazon didn’t single-handedly cause this problem, they have contributed to the growing income inequality, displacement and housing affordability issues facing our City. That is precisely why -- in their visits with 20 other cities -- Amazon has sought to speak with elected officials about plans to proactively address those consequences.  It seems only fair that as so many struggle to make their way through a tax system that’s rigged in favor of large corporations, that we ask those same corporations to financially contribute to the public health and housing solutions designed to address those consequences.

“Greater shared responsibility equals greater shared prosperity for all, businesses and residents alike.”

Editor's note: This story was updated to correct the amount of the head tax per employee. The tax would be $500.

KIRO