Amazon May Have to Deliver New Tax Revenue to Seattle

June 24, 2020, 8:45 AM

The Seattle City Council appears poised to reach into the pockets of big business, including Amazon, with a new tax on payroll as the city reels from a pandemic-generated revenue shortfall.

Competing bills to pay for coronavirus relief and affordable housing are on the table with preliminary revenue estimates ranging up to $500 million annually. The latest measure was introduced Monday, and a majority of the council is sponsoring one bill or the other. At least seven of the nine-member council—a veto-proof majority—have voiced support to impose such a tax.

Both bills reflect the council’s resolve to address a deeply regressive tax structure in Washington: The state has no income tax and thus relies heavily on a sales tax that falls disproportionately on lower-income people. Also in play is the long and politically fraught effort to make Amazon.com Inc. pay for the impact of having quickly added tens of thousands of highly paid workers in its headquarters city, causing housing prices and homelessness to spike. The confluence of the pandemic and a growing focus on social-justice issues makes it increasingly likely Amazon will have to contribute to the new revenue Seattle seeks.

“Amazon must be taxed,” Seattle resident Jason Fields told the council in a public comment session last week. “Amazon is profiting during the pandemic, and Bezos’ personal fortune is increasing while working people are suffering.”

High Pay Costs Companies

Amazon embarked on a foray into local politics in 2018 when it helped bankroll a successful campaign that forced the repeal of a much smaller payroll tax intended to address homelessness. But when it dumped $1.5 million into the 2019 elections to install a more business-friendly council, the move backfired. The electorate instead voted in an even more left-leaning body.

A measure introduced Monday would impose on companies with payrolls from $7 million to $1 billion a tax levied at the rate of 0.7% on total employee compensation from $150,000 to $499,999. It rises to 1.4% for total compensation of $500,000 or more. Corporations with payrolls of $1 billion or more would pay 1.4% on total compensation from $150,000 to $499,000 and 2.1% on compensation of $500,000 or more. It would impact more than 700 businesses in the city, according to a staff presentation on the bill.

Sponsored by council member Teresa Mosqueda and four others, the bill would raise $174 million annually from the companies in the $7 million-to-$1 billion tier. But council staff have yet to provide a revenue forecast for the $1 billion tier that would include Amazon with its roughly 50,000 employees in the city. The bill would sunset in 10 years and wouldn’t go into effect until 2021.

“People are being left behind in our current economy,” Mosqueda said at a Budget Committee meeting last week. “It means we need to act now with urgency.

‘Tax Amazon’ Bill

Further along in the legislative process is another bill that would levy a flat 1.3% levy on corporate payrolls exceeding $7 million annually, which would impact some 800 companies in the city. The “Tax Amazon” measure, sponsored by council members Tammy Morales and Kshama Sawant, would generate an estimated $500 million annually.

Sawant said the bill would generate hundreds of millions of dollars in additional revenue compared with Mosqueda’s measure and would create more housing. An emergency clause included with the bill would require seven votes to pass the council and the mayor’s signature to become law.

The Mosqueda proposal, with four co-sponsors, appears more likely to gain the mayor’s support than the “Tax Amazon” bill.

‘Severe Economic Shock’

“Mayor Jenny Durkan has long supported the need to reform Washington State’s regressive tax system,” Durkan spokeswoman Kelsey Nyland said in a June 17 email asking if Durkan would sign either bill. Durkan helped lead the charge for a bill that died in the state Legislature last session; that bill would have imposed in the county encompassing Seattle a tax on business payroll for salaries exceeding $150,000.

Durkan needs to fill a $300 million budget shortfall.

The bills have drawn a mixed response from the business community with the Chamber of Commerce expressing reservations.

“Our region is in severe economic shock,” said Alicia Teel, a chamber spokeswoman. “A new city tax on businesses at this moment will not help economic recovery.”

Expedia Group, with its headquarters on the Seattle waterfront, appeared with Mosqueda at a press conference to unveil her proposal. “Expedia Group is committed to finding solutions that address our hometown’s interwoven and unprecedented challenges,” said Richard Lazaro, the company’s government affairs manager for the northwestern U.S. Lazaro said Expedia hasn’t “yet endorsed” Mosqueda’s proposal.

Amazon didn’t respond to requests seeking comment.

To contact the reporter on this story: Paul Shukovsky in Seattle at pshukovsky@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Yuri Nagano at ynagano@bloombergtax.com

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