How Amazon Helped Kill a Seattle Tax on Business

Seattle is one of the most progressive cities in the country. It’s the place where the Fight for $15 movement first gained traction, where the city council last year tried to levy a tax on the city’s richest residents, and where local government passed one of the country’s first secure scheduling ordinances to give shift workers more notice of when they’d be working. And now, Seattle businesses have had enough.

Less than a month after the Seattle City Council unanimously passed a “head tax” ordinance that would have levied a $275 per employee tax on Seattle businesses making more than $20 million a year, the same council voted to repeal that head tax Tuesday, in a 7-2 vote.

Council members say they changed their minds in the face of a well-funded and vicious campaign that sought to put a referendum on the November ballot to repeal the head tax, a campaign that they say also sought to flush progressives from office in Seattle. They say big companies like Amazon have held the city hostage by refusing to engage in a discussion about new revenue streams to fund affordable housing, and that though they might have quashed this effort, they have put forward no solutions for the city’s problems. Business leaders, meanwhile, say they’re fed up with a constant stream of taxes that have done little to solve Seattle’s growing homelessness crisis. “It's a little bit the straw that broke the camel’s back,” Heather Redman, co-founder of Flying Fish Partners, a venture capital firm, and the chair of the Seattle Metropolitan Chamber of Commerce, told me, about the head tax.

If there’s one thing that came out of the pass and repeal the head tax—a months-long process that culminated in a raucous hearing Tuesday where self-proclaimed socialists chanted down city council members as they tried to vote—it’s that business interests and elected officials in one of America’s most liberal cities are extremely divided over how to solve a growing crisis in Seattle. That’s even though many of them come from the same political party.

Seattle has been trying to come up with solutions for its growing homelessness problem for months now. In November, the city council created a task force to look for “progressive sources of revenue” to assist people in danger of becoming homeless. Businesses were invited to participate in that task force, but declined to do so, Katie Wilson, the General Secretary of the Transit Riders Union, which was involved in the task force, told me. Redman, of the Chamber, told me businesses did not want to be involved because they were getting tired of being blamed for Seattle’s housing crisis. “Business declined to participate in that task force, because it was showing up to something where you are going to be yelled at, and you will not be listened to,” Redman said.

The task force eventually came up with a proposal for an Employee Hours Tax—called a head tax by the media—that was formally introduced in April. Businesses immediately voiced their opposition to the proposal. Grocery chains said that they would prefer a payroll tax to a head tax, according to Teresa Mosqueda, a city councilmember who was a part of the negotiations. But Amazon objected to the payroll tax, so it remained a head tax, she said. Then, in early May, before the council had even voted on the head tax, Amazon announced that it was halting construction on a new downtown Seattle tower. An Amazon spokesman told The Seattle Times that the company was considering subleasing space instead—implying that the company might leave Seattle if the head tax passed. The Building and Construction Trades Council then started expressing concern that the tax would kill construction jobs. This frustrated Mosqueda, who said Amazon had made requests about the format of the tax and then opposed it. “If folks are going to come to the table, and make requests, we have to make sure that they stay true to their word,” she told me.

The Amazon announcement shifted the tenor of a campaign that had thus far won support from many of the liberal city’s council members. “That really changed things overnight,” Wilson, of the Transit Riders, told me. “People got scared.” Wilson told me that the original head tax, a $75 million proposal to tax companies at a rate of $500 per head, would have passed, had Amazon not stopped construction. “Somehow when Amazon said we are going to shut things down, they drove a new narrative and they were successful,” Mike O’Brien, a city council member who initially supported the head tax, told me.

Amazon declined to answer questions about the specifics of its negotiations. A spokesman referred me to a comment by Drew Herdener, an Amazon vice president. “Today’s vote by the Seattle City Council to repeal the tax on job creation is the right decision for the region’s economic prosperity,” the statement said. “We are deeply committed to being part of the solution to end homelessness in Seattle and will continue to invest in local nonprofits like Mary’s Place and FareStart that are making a difference on this important issue.” (Amazon is building a permanent shelter for Mary’s Place, a Seattle nonprofit, within one of its new office buildings, that it hopes to complete by 2020 and that will house 200 people at a time.)

After Amazon halted construction, the council still moved forward on a deal. Amazon continued to negotiate behind the scenes with the mayor’s office and council members, according to Mosqueda. Council members had started off wanting to levy a tax of $500 an employee, but later backed down to $275, after which Amazon signaled to the mayor’s office that the company would not fight the tax, according to Mosqueda, who was a part of the negotiations. But immediately after the council passed the head tax bill in mid May, Amazon gave $25,000 to No Tax On Jobs, a committee created explicitly to put a referendum on the ballot to repeal the head tax. “Frankly, Amazon signaled they were OK with it, and within 48 hours, reneged on that,” Mosqueda told me. “I will absolutely have conversations with any business that wants to come to the table, but it cannot be hollow handshakes like we saw from Amazon.” No Tax On Jobs also received $25,000 each from Starbucks, Kroger, Albertson’s, and Vulcan, the privately owned company founded by Microsoft’s Paul Allen.

The fighting intensified. Community members and business owners started volunteering with the No Tax On Jobs campaign, which Wilson says was paying people per signature they gathered for repeal. Unions and progressive groups started “decline to sign” campaign urging people not to sign the petitions. The paid signature gatherers started getting into yelling matches with the volunteers who they thought were hampering their efforts. On multiple occasions, police were called. “Tempers really flared,” Wilson, of the Transit Riders, told me. Both sides accused the others of spreading misinformation—progressive groups said signature gatherers were telling people that the head tax would be taken out of employees’ paychecks and that small businesses were affected by the head tax, for example. Businesses said their employees were feeling so targeted and hated by progressives that they did not want to say in public who employed them.

O’Brien, the council member, told me the increasing vitriol was making him uncomfortable about continuing to support the head tax. “I feared that we would spend six months fighting each other,” he said. Voters were coming up to him and telling him that though they wanted the city to come up with new resources to fight homelessness, they didn’t think the head tax was the right way to go. When someone wearing a Bernie Sanders shirt told him that, he began to reconsider, he said. “If I’ve lost this person, I’ve lost the heart of Seattle,” he told me. Referendums are rare in Seattle, O’Brien said, and the fact that the opposition had gathered enough signatures gave him pause. That usually only happens “when folks think there is something that the council did that is way out of line,” he said.

The campaign against the head tax had far more resources than the campaign for it. Bring Seattle Home, the pro-tax group formed at the end of May, had raised just $30,000, about one-tenth of what No Tax On Jobs had brought in. The anti-head tax campaign also had help from influential sources. The Seattle Times has run seven editorials against the head tax since the city council introduced it on April 20, warning the city that the tax would kill jobs and hurt the city’s business climate. The newspaper said in May that it would also be affected by the head tax, as company president Alan Fisco told reporter Benjamin Romano that the tax “will be an additional financial burden that will take resources away from our news gathering and business model transformation.”

Slowly, Seattleites’ minds changed. Internal polls by pro-tax groups supporting showed that although 69 percent of people approved of unions, and that many had a low regard for corporations, around 55 percent of people wanted the head tax repealed, according to a person involved in the discussions who was not authorized to speak publicly. A year ago, a poll had found that 66 percent of Seattle residents supported a tax on the highest earners.

What changed council members’ minds about the head tax, though, was the tenor of the campaign to oppose it, which began to morph into a broad criticism of Seattle’s city council and its members. One ad, for example, showed a picture of council member Mike O’Brien with the headline, “Councilmember O’Brien admits that the City Council has no plan,” and was paid for by the Seattle Metropolitan Chamber of Commerce, according to The Stranger. The No Tax On Jobs campaign successfully shepherded the anger of hundreds of city residents over homelessness into anger at the city council itself. Council members and their progressive allies began to worry that not only would they lose the referendum, but they’d also get voted out of office come November. “It would be a very bad outcome if we lost horribly at the ballot, and they all get booted out this year,” Wilson told me.

This was, in some ways, very much the point, according to the Chamber of Commerce’s Redman. Many Seattle businesses were fed up with a council that they saw as increasingly hampering their ability to do business. The secure scheduling legislation that gave workers more predictability on their hours was creating a lot more paperwork for businesses; Seattle’s minimum wage was forcing companies to leave town, and the rhetoric that big businesses were creating Seattle’s problems were making even liberal businesspeople  uncomfortable, Redman said. “It’s this perfect storm: You say you hate us, and we don't think you’re effective,” Redman said. “It’s become this untenable situation.”

Notes from a meeting of the Downtown Seattle Association, a group of Seattle businesses, confirm that No Tax On Jobs was trying to use the issue as a rallying call for fed up businesses. Tim Ceis, a general consultant to the No Tax On Jobs campaign, told the meeting that the referendum would not just be on the tax, but also on “the city council and how they have been stewards of tax dollars,” according to leaked meeting minutes. “What do we want? A new city council,” he reportedly said. Jack McCullough, a board member of the Downtown Seattle Association, then told the meeting that the tax was “an opportunity to take back our city” that members may not see again in their lifetimes.

It started to become evident to progressives that No Tax On Jobs would easily get the signatures it needed, and then the consequences might be worse than just a tax repeal. Over the last two weeks, council members, the mayor, and progressive allies held conference calls over how to proceed, according to a person on the calls who was not authorized to speak publicly. The polling numbers showed that, without spending a few million dollars, progressives could not win, according to this person. They decided there were other November campaigns worth spending that money on, including a few statewide ballot measures. Over the weekend, the council members agreed to a repeal of the vote.

All of the council members who originally pushed the bill have spoken publicly about their frustrations with the process. They are concerned that a small solution to come up with new resources for Seattle’s homelessness problems was quashed, and that no new solution has been put forward.

“What this has proven is that various components of our community have the power to stop things,” O’Brien said Tuesday, at the repeal hearing. “This is less about the tax, and more about a referendum on the city council, and wanting to unseat council members,” Mosqueda said. When I asked Redman if the business community would support a new revenue stream to fund affordable housing programs, she told me businesses were skeptical that was the right approach. “I do not know that more revenue would solve it,” she said. “The city has been spending more and more on homelessness and it’s been getting worse.” She suggested trying something new, a “moonshot” type solution that reinvents the city’s approach to homelessness and affordable housing. She suggested using technology and evidence-based approaches to fight the problem. Amazon, for example, specializes in logistics, she said—why not apply the company’s expertise in helping people move through Seattle’s housing?

The repeal happened Tuesday afternoon, amid dozens of progressives holding up red signs reading “Tax Amazon, Not Working People,” and “Make Business Pay.” Opponents of the head tax held green and blue signs reading “Results First” and “Where Has Our Money Gone?” The council allowed for two consecutive public comment periods, in which school teachers, socialists, students, Amazon employees, and small business owners each spoke, and opponents booed the other side after their one-minute allotments. Multiple speakers were physically removed after refusing to stop talking. When Bruce Harrell, the president of the Council, called for members to vote, a group of activists drowned out the council members, chanting, “We are ready to fight, Housing is a human right.” One council member compared the progressives’ fight with the battle to repeal abortion in Ireland. Other council members left before she had finished speaking, frustrated with the people even further to their left.