SEATTLE – The Seattle City Council's Financial and Neighborhood Committee meeting at 9:30 am – the most boring name imaginable – was overcrowded. People in the crowd held signs: "Do not pick our jobs away" or "Control the rich."
The committee publicly commented on the proposed Progressive Tax on Business, a charge for Seattle's largest companies in support of homeless services. Last week, Amazon ̵
Now mayors and city council have to decide if they take this threat seriously. About a third of the participants in the hearing on Wednesday wore construction vests. One of them told members of the committee that the workers had to go home when the tax passed, looking their children in the eye and telling them that dad has no more work. Another named a member of the city council a communist (she is actually a socialist) and said that "apparently she is being paid by the Seattle residents to endure tantrums."
The applause in the room was deafening.
But the fight is about more than just a company or a policy. It's about the growing challenge of running American cities and all the ways companies make it even harder. Seattle faces an impossible decision: either it raises revenue from employers and risks expelling it, or it continues to hold taxes on voters, risking a backlash that could aggravate the problem it seeks to solve. Whatever happens here, it will be a template for the rest of the country.
Do not Call It "Amazon Tax"
The details of Seattle's tax rulings are crucial to understanding why Amazon hates it so much. Under the current proposal, the city will charge 26 cents for each hour its employees work. That's about $ 520 per worker per year. Although the tax applies only to companies with a turnover of more than $ 20 million per year or about 3 percent of companies in Seattle, Amazon employs around 145,000 people.
And this structure is only temporary. The tax is unchanged in the first three years: the same fee is levied on wages, regardless of whether an employee earns $ 31,200 (the minimum wage here) or more than $ 100,000 (which many Amazon employees earn). But in 2021, the flat fee becomes payroll tax. Big companies will have to pay 0.7 percent of their employees' wages – that's $ 220 a year for minimum wage workers and more than $ 700 for Amazon employees.
It is the second part, larger taxes for larger incomes, which seems to worry the company here. A few days after the announcement by Amazon, the CEO of the Seattle-based company Zillow made the same threat  and took the tax " misguided and plumped by an instrument ."  But you can not talk about where the money comes from without talking about where to go. Homelessness is an emergency in Seattle. Literally. In 2015, the mayor issued an emergency notice about the sheer number of people sleeping and overcrowded outside and in their cars. At the last count, Seattle had 11,643 homeless people and its home of King County had the third highest homeless-concentration in the nation. A Zillow study last year estimated that all 5 percent in Seattle rising rents pushed 258 more people into homelessness. The rents increased by 13.5 percent last year alone.
The proposed tax would add about $ 75 million annually to tackle the crisis and raise the city's total homeless budget to $ 200 million. Three-quarters of the revenue would be used to build affordable housing, and a smaller proportion would go to direct, immediate services – things like shelters, "hygiene centers" and shelter beds.
"It's not about Amazon," said Lisa Herbold, a Seattle City Council member and co-sponsor of the tax. "It's about the humanitarian crisis in our city."
Amazon against taxes
It is clear that Seattle's tax is being polluted by Amazon. The question is how much?
Everything the company has said so far has been rather lukewarm. In fact, Amazon has not stopped the construction of towers in the city center. It has stopped planning future construction, a very different (and less expensive) decision. Similarly, the company announced that it would be possible to sublet some floors in one of the office buildings already under construction. That does not mean that Amazon cries crying, but that means that the company's response is still very uncertain.
Even if members of the Seattle City Council endorse the tax – hell, even if it triples it – Washington is still a relatively cheap place to do business. It has no income tax (which is effectively a pay rise for Amazon employees who come from elsewhere), no capital gains tax and no corporation tax. In in 2006, the city even passed an almost identical tax on employees albeit to a much lesser extent, before being repealed during the recession.
Then the aspect of public relations has to be considered. Although it will grow after 2021, Amazon's tax legislation will be a pocket change in the final quarter compared to its $ 1.6 billion profit . Relocation of staff, freeze and reverse course also incur costs.
Plus, does a non-super-popular corporate behemoth really want to pull out thousands of jobs from a city after being asked to fund fund services for the homeless? While Amazon is less reputational and less likely to be boycott than many companies, its executives must know that throwing a hiss over this law has some backlash.
Amazon could still pull Jobs from Seattle. The only thing CEO Jeff Bezos loves more than expanding his business is tax evasion. In 2012, when a handful of states attempted to enact laws requiring Internet vendors to collect sales taxes its vice president for global public policy described the effort as "unconstitutional."
A few years ago, Amazon stopped its plans to build a warehouse in South Carolina if local lawmakers did not grant exemption from the state sales tax . Bezos even has reportedly considered setting up his company on a Native American Reservation to avoid taxes. Just because Seattle would go over a small tax hike does not mean it will not happen.
This proposal is an emergency hole
Over the last five years, Seattle has experienced unprecedented growth, which to a large extent has driven Amazon and other large corporations. This has unbearably burdened the housing market, schools and infrastructure. As the bill for services has grown, the way the city pays for it has become increasingly unfair.
Washington has the most regressive tax structure in the country. The poorest 20 percent of the population pay on average 16.8 percent of their income in state taxes. The richest 1 percent pays only 2.4 percent. This means that low-income people pay effectively for the city's growth.
And yet, almost every way to fix Seattle's tax and tax problems is blocked. The most obvious solution, income tax, is illegal under the constitution of the state (or at least as the Supreme Court proposed the 1951 constitution in 19659003). Last year, the city council passed a " high income tax ", but a lawsuit that prevented its implementation was filed about 10 minutes later.
In addition to the (high and regressive) sales tax, Seattle relies heavily on property taxes. But thanks to a vote in 2001, this revenue must not grow by more than 1 percent per year. Everything the city needs (libraries, fire stations, schools) must be approved individually by the voters. Although Seattle's property taxes are below average compared to other cities the constant taxes and surcharges contribute to the city squeezing Seattleites for more money each year without maintaining the end of the business
Homelessness is the perfect encapsulation of this dynamic. As the city has grown, it has nearly doubled its budget for homeless services . In 2016, voters approved a $ 290 million affordable housing fee. The city gets more people into permanent housing than ever before.
But living here, it is immediately and viscerally clear that these efforts are not enough. Rising rents push people onto the street faster than the city can bring them back to the house. Almost half of the city's homeless population is now unprotected. Last year, a record of 169 people died asleep on the road and the city is already on track to break the record again.
Seattle's current situation poses a fundamental challenge for lawmakers across the country: solving major problems requires a bold, transformative policy. However, what city leaders can do in the face of structural barriers and skeptical voters is just a small step-by-step improvement in the status quo.
And that's the Progressive Tax on Business: half a measure. No matter what Amazon decides, the taxation of jobs, as well as the taxation of cigarette purchases, will lead to less of it. And the new tax is unlikely to lead to a significant reduction of the city's homeless population. The city estimates that the tax will produce 1,780 units of affordable housing although its own resolution says it needs more than 17,000.
None of this is an argument against the tax. Council member Herbold points out that this could be Seattle's only way to make its tax laws more progressive. Despite fireworks at public hearings, the tax is relatively modest and tailored to those companies that can afford it. Nor is it the only tax of its kind: Wilmington, Delaware ; Denver ; and many other cities tax companies on the number of employees they have, a so-called poll tax.
This week, when Seattle debated the $ 75 million poll tax, the Chamber of Commerce issued a report estimating that solving homelessness would cost $ 400 million. A suggestion by the mayor to reduce the revenue to $ 40 million triggered an even tougher hearing of the committee. The protesters shouted "$ 75 million, no blackmail!" To another crowded audience. The original proposal was passed and will be voted on Monday, but the mayor could still veto.
But this is the debate here, what has become possible and necessary for the city to argue: whether to spend 10 percent of what it costs to solve homelessness, or 20 percent.
It's getting harder for US cities to track themselves
But the bigger question is how cities should react to threats like Amazon.
The Call for Proposals for the company's second headquarters explicitly stated that "a stable and business-friendly environment and tax structure will be a high priority". Cities responded in kind: Chula Vista, California, offered free land. Fresno, California, provided control over how municipal revenue would be spent. Chicago even offered to waive income taxes on Amazon employees.
The calculation of these cities is all about the multiplier: each job created by Amazon creates another 1.5 in " indirect employment " – advisers, cooks, schoolteachers. Apart from these employers, tax relief is not available. Perversely, it is only the largest companies, the ones with the greatest power and the least need for unfair advantages, that make cities give away themselves.
It's not even clear what Seattle has given up to lure Amazon's recent expansion here. The company did not respond to inquiries as to how many employees it has in Seattle or how much it pays in city and state taxes (though late last week "a person in the company familiar with the data" made a "rare disclosure" The Seattle Times, which paid Amazon $ 250 million in local taxes – without specifying what types of taxes or where to go.
Regardless of where they operate, businesses have every incentive to play exactly the game Amazon plays. For the shareholders, every dollar a company pays in taxes is wasteful. As Amazon announces its second headquarters, it can begin to play host cities against each other: Hey Seattle, we're considering adding another 1,000 jobs. It's you or Pittsburgh. What will you give us?
This is exactly what the CEO of Zillow warned this week. "We're actively trying to decide where to place the next few hundred heads, and that's the kind of thing that causes us to think about putting this expansion into other cities," he said.
The challenge of earning enough revenue Managing a city appropriately will only get worse. Excluding health care federal grants for cities are at their lowest level since 1980. Despite the growing economy, 30 states have lost income . The Trump government has announced its intention to cut transport financing and housing subsidy . Without outside support, cities will increasingly need the revenues of their own voters and their largest employers.
Seattle is a case study of what these struggles will look like. The more desperate the cities become, the more they are dominated by the lenders. And at the same time, their populations become more and more frustrated with the constant increases in taxes and fee increases.
The most depressingly revealing comment from the City Council hearing on Wednesday came from Howard Bess, an adviser to the Downtown Emergency Service Center, a homeless shelter in Seattle. He apologized for being tired; He had been awake all night, helping Seattle's homeless population find an "island of relief."
"I do not see that someone who fights against dies on the street," he said, "or not to pay their mortgage or be unable to wear new shoes or clean clothes our clients could certainly use this help. "
The applause for him was even louder.