Reason.com

Free Minds & Free Markets

Seattle's Idiotic Tax on Amazon

The tyranny of local government was on full display this week.

The tyranny of local government was on full display this week. The culprits are some greedy members of the Seattle City Council. Backed by their union friends, they just voted to impose a "head tax" on large employers, such as Amazon and Starbucks. The real victims, of course, will be the companies' employees.

Thanks to Seattle's many thriving businesses, its revenue base has been growing much faster than its population. Unfortunately, the City Council is doing what it does best and, rather than look into streamlining and cutting its ineffective spending programs in order to combat Seattle's homeless problem, is looking for fresh cash. Seeing as large companies have it, the council set out to take it.

The result is the so-called head tax on Seattle businesses that gross at least $20 million annually. According to The Seattle Times, 585 businesses in the city will be subject to the tax. Not surprisingly, the tech giant Amazon is expected to pay the most under the tax. The initial proposal was for a $500 tax per employee, which, in Amazon's case, would have meant an added $20 million in labor costs. Thanks to a veto threat from the mayor, the council reduced its tax grab to $275 per employee.

When the tax was initially proposed, the company announced that under those circumstances, it was going to pause construction planning for a new giant office tower on its new downtown campus. If you employed 40,000 people and realized that you might always be the target of revenue-addicted bureaucrats, you might do the same. But those who constantly lust over other people's money have no shame. A union-backed activist group named Working Washington immediately called for—wait for it—Amazon to be charged with a felony for the crime of "intimidating a public servant." Simply questioning whether its business expansion in Seattle would be a good idea in the face of an arbitrary and substantial increase of its labor costs was the alleged crime.

Of course, what Amazon did is no different from what many taxpayers do when taxes increase to cover poor money management. I, for instance, am in the process of deciding whether I really want to continue offering my home through Airbnb now that Arlington County, Virginia, requires a business license to rent a room in one's own home, a 7.25 percent tax and filing a monthly tax return for the unit.

Thank goodness, in Seattle, the state's attorney general stepped in and informed everyone that no crime had been committed and no legal action would be taken. Basically, it isn't illegal yet in Seattle to contemplate the best path for your business when the taxman comes after you. But a statement by a Working Washington spokesman should trouble the company, as it's an indication that this is only the beginning. It reads: "It is extraordinary that Amazon's subprime mob boss behavior was so brutal it ignited a citywide debate over whether it was actually criminal. All that because the richest man in the world wants to try to avoid stepping up to address our city's homelessness crisis."

There's no point talking about all the ways that statement is shocking and over-the-top scary. But it's worth noting that Amazon does its share when it comes to filling the Seattle treasury's coffers through its business and sales taxes, the income taxes paid by its 40,000 employees (up from 5,000 in 2010) and the real estate taxes they all pay. And never mind that Amazon has donated half of a six-story building to a homeless shelter, according to The New York Times, "providing it with 47,000 square feet of space with private rooms that can hold 65 families, or about 220 people and their pets."

Besides, this head tax won't be paid by Amazon. Companies don't pay taxes. People ultimately pay taxes. That means that this tax will come out of the wages of future employees, the bonuses and wage growth of current employees, the dividends of shareholders, and the pockets of customers, who will face higher prices. It could also lead to the longer-term decision by Amazon to shrink its Seattle operation for the benefit of its second headquarters, the location of which is still being decided. Other cities should take note. Don't repeat Seattle's mistake.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Shirley Knott||

    Weren't there (many) more unions vociferously protesting this obscenity than the 1 backing it?
    That rather undercuts the framing of the lede.

  • MoreFreedom||

    You probably don't realize that Amazon isn't unionized. And given the shrinking unions and the companies they shake down, there aren't many union companies affected if any.

  • Rossami||

    While Amazon isn't unionized, there were a number of construction industry unions protesting it. They rightly realized that their livelihoods are also threatened when governments adopt policies that will crush business expansions.

    I think the better criticism is not that Working Washington is union-backed but that they are flaming hypocrites. According to their own website, they have repeatedly engaged in political advocacy that would have been equally "illegal" under their novel (but absurd) legal theory.

  • tuhad||

    I just got paid $6784 working off my laptop this month. And if you think that¿s cool, my divorced friend has twin toddlers and made over $9k her first month. It feels so good making so much money when other people have to work for so much less.
    This is what I do...>>>> www.profit70.com

  • Harvard||

    Any lasting injury as a result of this will be Amazon's fault. They have the means to jack up their facilities and relocate in Wyoming, which would be a lasting lesson to Seattle and any future parasites.

  • loveconstitution1789||

    Amazon leadership clearly has had enough of Seattle.

    I predict Amazon will pick their new HQ in Texas or Georgia, transition Amazon employees to new HQ, sell off Seattle property at higher Seattle land prices, and then vacate Seattle forever.

    Amazon would be a foolish company to stay in Washington state where local politics could easily become state-wide politics.

  • Microaggressor||

    The rest of the state isn't as far gone as Seattle. East of the mountains, for example, is pretty rural and conservative. It would be easier for Amazon to move to an adjacent city like Bellevue or Redmond.

  • J Johnson||

    Seattle is overcrowded with tremendous growth. We'd arguably be better off without amazon Amazon had brought many new jobs and people into the city. But many other large companies are here.

    Amazon won't move far, because they are dependent on their programmer workforce. When they pick a new city in 5 years they could build up a large programmer workforce, but it will take time. Amazon has about 40k people in seattle now, I'd guess at least half are engineers. Amazon is here because there are lots of engineers and many well educated entrepreneural people.

    There's no room in Bellevue or Redmond for Amazon. Also, did you Redmond has their own head tax? Several cities on the east side have them, but not Bellevue currently. Redmond has done very well, with multiple companies including the NA Nintendo presence.

    I think the article doesn't provide any evidence that the tax was idiotic. It might be stupid, but lay out reasons. Seattle needs more infrastructure for roads, sewer, transit, housing, police, fire, we are just growing so fast. The city must have more revenue than ever because more people move here and they spend money and thus increase sales taxes. But that doesn't mean that the amount of tax revenue each person pays matches the infrastructure needs of the city. I think the major issue is that the city is way behind, and doesn't have reliable and large enough revenue sources, that is why they go for things like this.

  • loveconstitution1789||

    In the video, union construction workers were protesting that socialist Seattle city council member who wants to kill all dissidents.

    The Democrats will be shocked at how bad they lose in election 2018 and 2020. Blue collar workers are leaving the Democratic Party.

  • CDRSchafer||

    Hopefully the Democratic Party becomes a very exclusive club for celebrities, eccentric billionaires and freeloaders.

  • Inigo Montoya||

    What are the chances the city council's actions will have the effect of actually attracting some new businesses to the city?

    Businesses involving the manufacture and sale of wood chippers, that is.

  • MatthewSlyfield||

    0.00000000000000000000000000000000000000000000000%

  • MatthewSlyfield||

    0.00000000000000000000000000000000000000000000000%

  • Microaggressor||

    The construction unions will be back on board when all the gulags need to be built.

  • I am the 0.000000013%||

    The phrase "The tyranny of local government" without some additional explanation is too incendiary for me.

    It's certainly true, but the alternative of non-local government is far worse even when they are acting benevolently.

    Amazon will win this battle. Whether the government idiots will be blamed is largely up to what people want to believe.

    In Seattle I'm sure they will see themselves as victims, which is it's own punishment for those who choose that path.

  • barfman2018||

    What about the alternative of no government?

    *barf*

  • Shandower||

    Seattle rules the state through the initiative system. Seattle doesn't like guns? Write a law (without regard to vagueness, enforceability, effectiveness, or constitutionality), have a signature campaign to get it on the ballot, get the Seattle-ites to vote on it, and it becomes STATE law. That's how we got UBCs. That's how we got recreational weed. That's how we got emissions taxes.

    I don't even disagree with some of the initiatives, but I disagree with the concentrated hard-left population on the Sound making law for the rest of the state, because that's how it always goes - the left (in multiple senses) gets what they want and the middle and right side have to suck it.

  • Mickey Rat||

    The government of Seattle is acting exactly like the sort of predatory monopoly the progs claim to hate in the private sector. Threatening criminal action against a major customer who is resisting their price increases is a new layer of special.

  • Bubba Jones||

    The important difference is that Arlington wants to shut down air bnb

  • Architect of Liberty||

    Seattle's city council is killing the goose that lays the golden egg. If Amazon decides to pick-up and move elsewhere, the city government will wind up having larger problems than the one currently in the news... ...and for most other "big" cities, they would happily deal with a homeless population comparable to the one that's currently in Seattle.

  • Longtobefree||

    "All that because the richest man in the world wants to try to avoid stepping up to address our city's homelessness crisis."
    Of course, if the richest man in the world addressed the city's homelessness crisis by abolishing the city council, the source of the crisis, the same group would howl and whine and throw a hissy fit.

  • J Johnson||

    The city council didn't make the homeless problem, it's been building for years. They also haven't done much to ameliorate the problem.

  • georgeliberte||

    While not an Ayn Rand fan, isn't this essentially the plot of Atlas Shrugged?

  • Architect of Liberty||

    Yup -- it's exactly how 20th Century Motors went down the tubes...

    ...and became the lead-in to John Galt declaring "I will stop the motor of the world"!

    From each according to their means, to each according to their needs...

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online