Seattle City Council's Lone Socialist Is Reintroducing Her Amazon Tax

A previous version of the tax was repealed a month after it was passed in 2018.

Seattle's Amazon tax is trying to come back. On Wednesday, the Rainy City's lone socialist councilmember, Kshama Sawant, announced a plan for a tax on the city's largest employers to fund affordable housing and Green New Deal–style home renovations.

"This will not only transform the lives of Seattle's working people, it will set a historical marker for cities around the nation," said Sawant. "It's more than reasonable for the biggest, richest companies in our city to pay zero-point-three percent of their revenue to do their part to address our city's crushing housing crisis."

Her tax proposal would levy a 1.7 percent tax on the payrolls of Seattle's 825 largest businesses. She expects this to raise $300 million a year.

This money would fund the construction of 8,000 new affordable homes and retrofit an additional 47,000 units to meet "Green New Deal" standards, which involves converting them from gas or oil to electric systems.

Grocery stores, public employers, and nonprofits would be exempted from the tax, but Seattle's largest private employer is very much targeted by it.

"Companies here have reaped billions because Washington state has the most regressive tax system in the nation. It's time for Amazon and other major corporations to pay their fair share," said Sawant.

Sound familiar? It should. In 2018, the city council unanimously passed a slightly different version of the Amazon tax that applied a $275 levy on every employee at companies grossing over $20 million a year. This was predicted to raise $50 million a year.

That proposal attracted nearly unified opposition from Seattle's business community, as well as from some labor groups, and it was repealed a month after it was passed.

Sawant vowed to bring back the Amazon tax, laying the blame for its defeat on the "blatant lies" of big business.

The 2019 city council elections—where Sawant retained her seat in a close race, and most other Amazon- and business-backed candidates lost—have given the her latest tax drive a tailwind.

Unlike the last version, Sawant's new Amazon tax is not a literal tax on jobs. That's an improvement, says Garrett Watson, a policy analyst with the Tax Foundation. But it still has its flaws.

"Payroll taxes ultimately harm employees themselves. Economists generally across the board agree that employees fully bear the burden of the payroll tax," says Watson, telling Reason that employees at firms targeted by Sawant's measure "will earn less money, see fewer raises, and bear that additional tax."

A city-level levy could also encourage firms to relocate outside city limits to avoid the tax.

Mayor Jenny Durkan has already come out against Sawant's measure, pointing out that the city rejected a similar but smaller tax just two years ago, pointing out that it's "six times bigger than the failed Council head tax proposal" and that it would only lead to a "failed, divisive fight."

Sawant has already said she's planning on routing around any city council opposition by introducing a parallel ballot initiative, which could have more success in Seattle. (Last week the city's Ethics and Elections Commission determined Sawant violated city elections law by using city resources to promote an Amazon tax ballot initiative.)

At the same time, a bill pending in the Washington Legislature would authorize counties of over two million people (meaning only King County, which contains Seattle) to impose a tax on wages that large companies pay to workers earning more than $150,000.

The tax itself is generally in line with what Sawant is pushing, but there is strong speculation that a preemption clause will be added that would forbid a city government from imposing a payroll tax if the county has already passed one.

To counter this threat, Sawant sent an angry letter to Rep. Nicole Marci (D–Seattle), the sponsor of the state payroll tax bill, telling her that any preemption clause would be an "egregious selling out of working people."

A county-wide payroll tax would avoid some of the risks of companies leaving Seattle, says Jason Mercier, of the Washington Policy Center. It would still be yet another cost that business would have to bear.

"It's still setting up a situation where these businesses are already paying [business and occupation] tax, they're already paying sales tax, they're already paying property taxes, and now you are going to tax them for how much they pay their employees," says Mercier.

All attempts to make Washington's tax code more progressive on paper through additional taxes on big business would make state revenues less predictable, he adds, saying that the state has "one of the most stable tax structures in the country because it's a property-, sales-, gross receipts–based tax code. It doesn't have the volatility of corporate or personal income tax code."

Leaving these myriad policy and political problems aside, there's also the question of what Sawant wants her Amazon tax to pay for: affordable housing. More good could be done at less expense to taxpayers by removing restrictions on private developers building new homes.

Seattle has famously strict density restrictions in much of the city, and state law requires King County to maintain an urban growth boundary that restricts housing development in rural areas.

Sawant, to her credit, has voted in favor of recent successful city bills to legalize accessory dwelling units in residential areas and to upzone certain neighborhoods. (She has also tried to undo other upzoning plans to stop particular housing developments.)

Working to expand on these positive reforms would be a lot more constructive, and potentially more politically palatable, than agitating for yet another high-stakes brawl with Seattle's business community.