Ideas for a new tax on big businesses like Amazon swirl in Seattle as debate heats up again

Politicians, activists and business leaders are scrambling to stake out positions ahead of another debate brewing in Seattle over taxing large corporations, less than two years after the City Council passed and then almost immediately repealed a “head tax” under pressure from a potential referendum and critics that included Amazon.

There’s enthusiasm among local progressives to try again in 2020 — tapping into a national discussion about taxation and the wealthy amid the Democratic presidential primary —  but with various ideas about how to proceed. Labor unions could play a pivotal role as Councilmember Kshama Sawant, Mayor Jenny Durkan and others work on competing proposals, with the possibility of a King County tax in the mix.

Boosting the stakes are questions about how much huge companies and their executives are paying in taxes across the state and country. Amazon isn’t the only business under the microscope, but its outsized Seattle presence has made the tech and commerce juggernaut a primary target.

“We still can’t solve our housing crisis, let alone achieve urgent goals like carbon neutrality or providing affordable child care, without substantial new revenue,” said Katie Wilson with the Seattle Transit Riders Union advocacy group, partly blaming Washington state’s regressive tax structure. “Large corporations need to step up and contribute. We have a huge opportunity this year to make that happen.”

Sawant, the third-term socialist determined to harness momentum from her November reelection, will restart the ‘Tax Amazon’ campaign that she led in 2018 with a rally Monday at Seattle’s Washington Hall.

Sawant hasn’t presented a detailed plan but says another head tax based on employee hours or a percentage tax on total payroll could work. The prior head tax would have raised an estimated $47 million last year for affordable housing and homeless services had it not been repealed. Sawant wants much more.

She says she intends to introduce legislation soon to raise money for housing and, like in 2014 during discussions about a $15 minimum wage, use the threat of a ballot initiative to exert pressure.

“I don’t think going directly to the ballot is the way to go,” she said. “The council can play a bold, progressive role.”

Democratic Socialists of America activists already are preparing to collect signatures for a ballot initiative, while Councilmember Lisa Herbold says she and her council colleagues could draw up a tax proposal and send that measure to the ballot.

“We’re not relying on the council,” said Democratic Socialists activist Philip Locker, noting opponents could again try to referendum any legislation.

Herbold declined an invitation to Monday’s rally because Sawant hasn’t written legislation yet and because Herbold disagrees with singling out a company that “a huge segment in our city works for and an even larger segment uses.”

Sawant says Amazon has the most cash, has disrupted Seattle’s housing market the most and has incurred the most popular anger. Herbold said, “I don’t think targeting Amazon is a successful political strategy.”

Amazon’s growth has brought huge economic benefits to the region over the last decade through 53,500 Seattle-area employee salaries and construction of an enormous urban headquarters that’s reshaped the city, a company spokesman said.

Durkan, who in 2018 watched the council advance its head tax, may not stay on the sidelines so long this time around. She’s begun talking to allies inside and outside City Hall about her own ideas. A countywide tax and a tax based on highly paid employees, or both, are options Durkan has brought up, according to three sources who’ve dealt with her office in the past week.

The mayor “doesn’t believe it is productive for the city to revisit” a head tax but she “does believe in bringing people together to work on a progressive tax that addresses our needs for behavioral health, housing and homelessness” and that includes “accountability measures,” Durkan spokeswoman Stephanie Formas said. “Mayor Durkan has had many conversations … to look at a range of options locally, regionally and statewide.”

County Executive Dow Constantine would likely be involved in a wider approach.

Business lobbyists are warning against another head tax, and the company in the eye of the storm, Amazon, sought this past week to publicize the taxes it already pays.

“We are a significant taxpayer in the state and separate from that we are investing to make Seattle a better place to live and work,” spokesman Aaron Toso said, citing the company’s contributions to public transportation and a shelter for homeless families slated to open soon in an Amazon building.

Toso declined to specify the company’s Washington state and local tax payments, which were reported elsewhere, attributed to an anonymous company source.

Polling has suggested that Seattle voters are open to taxing wealthy people and companies, though details matter. Foes slammed the 2018 head tax for applying to supermarkets and local chains in addition to tech giants, which made the measure less popular with many voters.

“We’ve been steadfast in our position that taxing jobs isn’t a good idea,” said Don Blakeney, vice president at the Downtown Seattle Association.

Unions could decide which direction the debate moves, because they have money, wield political clout and haven’t yet signed on to any particular strategy. So could voter sentiment.

Though low-income housing lobbyist Marty Kooistra hopes to see business leaders collaborate on a solution, Sawant’s campaign could become a “freight train.” People in Seattle want desperately to help ease homelessness, he said.

That sentiment has spread beyond Seattle, contributing to questions about how companies like Amazon and Microsoft and their executives are taxed across the map. Microsoft didn’t return a request for comment.

Amazon’s tax footprint

Lawmakers in Olympia and Democratic presidential candidates are applying scrutiny, and one of the world’s wealthiest people recently advocated nationwide changes, including a larger estate tax.

“I don’t see any reason to favor wealth over work the way we do today,” Microsoft mogul Bill Gates wrote on his blog recently.

Amazon wasn’t alone in opposing the Seattle head tax in 2018, nor is the Jeff Bezos behemoth the only company that’s been criticized on taxes. Starbucks, Vulcan and CenturyLink also supported a referendum campaign, as did many voters. Like Amazon, Microsoft, Boeing and all of Washington’s corporate titans have availed themselves of tax incentives.

But Amazon has made tax minimization a core part of its business strategy, gaining an advantage over brick-and-mortar competitors in its early days by not collecting sales taxes in many states. The company would have paid the most under Seattle’s prior measure, and it spent a record $1.5 million last year on council candidates, including Sawant and Herbold challengers.

The $275-per employee annual tax on companies grossing at least $20 million per year inside the city would have cost Amazon more than $14 million last year, assuming it had at least 50,000 employees in Seattle. The company is growing its operations in Bellevue and across the country.

In 2018, Amazon’s pretax profit was nearly $11.3 billion, up from $3.8 billion in 2017, and it reported a $129 million 2018 federal tax refund, benefiting from tax credits, its practice of compensating employees with stock and President Trump’s 2017 tax bill. It reported $322 million in U.S. state taxes and $563 million in international taxes.

Washington authorities are barred from disclosing detailed taxpayer information without authorization from the taxpayer, leaving the public in the dark when it comes to evaluating potential changes to tax laws.

“We should be able to know what Amazon is paying,” said Andy Nicholas, senior fellow at the nonpartisan Washington State Budget and Policy Center.

Public records only hint at what Amazon has paid in taxes while building up its headquarters. The 41 properties that the company owns or is building in Seattle and Bellevue were worth more than $3 billion in 2019, according to King County Assessor records. Their collective property tax bill was about $25 million, and Amazon is Seattle’s largest property taxpayer.

Amazon operates more than a dozen distribution facilities around the county and eight elsewhere in Washington, according to logistics consulting firm MWPVL International. In addition, it leases other office space, such as the Redmond buildings it recently claimed for its satellite-communications business.

From 2010 to 2018, Amazon, by its own account, spent some $4.5 billion to build its Seattle headquarters. That’s enough construction activity to generate nearly $450 million in state and local sales taxes.

During approximately the same period, from 2012 to 2018, Amazon deferred more than $79.1 million in sales and use taxes under a long-standing state program designed to encourage tech companies to build facilities and buy equipment here. Those taxes are canceled completely when a company continues operating the facilities and equipment for eight years.

Washington businesses also must pay the state’s business and occupation (B&O) tax. Last year, Microsoft advocated for an increase in the B&O tax rate for advanced computing companies with more than $100 billion in annual revenue, a category of two in the state: itself and Amazon, which also ultimately supported the measure.

The tax hike, which took effect Jan. 1, will collect $4 million to $7 million more from each of the tech giants to expand access to higher education for Washington residents.

Rep. Drew Hansen, D-Bainbridge Island, a leader in that effort, said it was “enormously significant” that the companies ultimately supported raising a tax on themselves.