Amazon Plays Chicken with Seattle and Wins

The Washington post is reporting that the Seattle council has voted to repeal a tax to help homeless amid opposition from Amazon and other businesses. The Atlantic goes further, telling us How Amazon Helped Kill a Seattle Tax on Business.

Amazon Seattle Tax
The new tax would have raised $48 million annually to combat Seattle’s homelessness and affordable housing crises. The Seattle area has the third-largest homeless population in the country, according to federal statistics.

How would it have done this?

“It’s immensely disappointing,” said Seattle City Council member Mike O’Brien (D), who voted for the tax before voting for its repeal. “[But] it has become more and more clear that the people of Seattle seem to agree with Amazon — and at least part of the narrative they and the Chamber of Commerce have been putting out.”

So what narrative is the Chamber of Commerce putting out?

The abrupt reversal enraged some supporters of the “head” tax, who argued that wealthy corporations in the city can afford to pay more to address homelessness. The measure, passed unanimously by the city council last month, levied a $275-per-employee tax on companies with at least $20 million in gross annual revenue.

A tax per employee that doesn’t go to services that employee will use is extremely regressive. Taxes should be on profits, not expenses. This probably explains why the Chamber of Commerce was against the tax. How did they gain the support of the people of Seattle?

“The people who are being disruptive are being disruptive because they are angry,” said Tae Phoenix, one of the activists. “The system is not working for them, and disrupting it is the only thing they can do. They are desperate, and they are angry, and they have a right to be.”

They have the right to protest.

Tax experts say the reversal underscores the limited leverage that cities across the country have over corporations such as Amazon, which helped wage an intense public relations campaign to turn the public against the tax. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)

Makes sense.

“There’s a bargaining power problem here, and cities are on the wrong side of it,” said Matthew Gardner, a tax policy analyst at the Institute on Taxation and Economic Policy, a left-leaning think tank. “When Amazon decides to be bullies and make this kind of threat, it’s really hard for officials to know how seriously to take it. Nobody on Seattle’s city council wants to be the one who chased Amazon out of town.”

So Amazon actually threatened to leave the city? I see why the council backed down. If they were to lose Amazon, they would have lost far more in tax revenue than this head tax would have brought in. I hardly consider Amazon threatening to leave the city “bullying”. They have no obligation to keep their head office in Seattle.

The tax was scheduled to go into effect in 2019 and hit almost 600 businesses, said Louise Chernin of the Greater Seattle Business Association, a business group that helped fight the tax along with the Seattle Metropolitan Chamber of Commerce. Critics accused Seattle officials of bending to pressure from Amazon, but Chernin stressed broad opposition to the proposal from across the city’s business community.

Not surprising.

Republicans in the Washington legislature also said they were preparing legislation to strike down Seattle’s head tax. Washington’s state government is narrowly controlled by Democrats, but at least one moderate Democrat in the legislature also opposed the head tax, calling it bad for the party’s brand.

I can understand why the state wanted to interfere, but they should not.

The city council approved the tax despite months of public feuding between local officials and businesses. Seattle officials initially pitched a $500-per-employee tax on large businesses. In a show of opposition, Amazon stopped construction on a new tower in the city.

Ouch. That shows they were serious, since they doubtless need the space. They are about to begin construction of a new building in Vancouver that will sit on an entire city block, and Vancouver is only a branch office.

The online retail giant also criticized the final tax package when it was passed, saying in a statement that the company was “very apprehensive about the future created by the council’s hostile approach and rhetoric.”

What were the council’s approach and rhetoric?

A well-funded and vicious campaign sought to put a referendum on the November ballot to repeal the head tax, a campaign that [councillors] 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.

Seems like something the business community would do. It is not the business community’s job to solve 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.

That’s the thing about taxes. Politicians are terrible at solving problems, and the taxes actually create problems.

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.

Yep. If you shit on someone for a problem they aren’t responsible for, they will resent you for it. Don’t be surprised when they aren’t interested in helping you solve it.

“I have a news flash for council members who capitulated to this in lightning speed: This was never going to be easy in the face of mass corporate misinformation,” Kshama Sawant, a council member and a member of Socialist Alternative, a socialist political party, said in an interview. “It’s a complete betrayal of working people.”

How is it that Socialists don’t understand that the working people are only working people if there are companies willing to pay them for their services?

Seattle tried raising money last year by passing an income tax on its wealthiest residents. But that measure was struck down by the courts as illegal under state law, according to Richard Auxier, an analyst at the nonpartisan Tax Policy Center. “There’s nothing but political, tough decisions for cities trying to raise money,” Auxier said. “A lot of localities are in a tough spot because states have limited their options.”

The same is true in BC. Cities are allow to tax property, but not income.

O’Brien, the council member, said that he did not have an immediate plan for how to address the city housing shortage but that the risks of losing the ballot fight were too great. He noted that opponents of the head tax had “unlimited resources” to spend on advertising and voter mobilization, and he feared moderate Democrats in the state legislature would join Republicans to outlaw the tax hike even if it survived a ballot challenge.

What was the risk if the ballot measure passed?

“I was thinking there’s a decent likelihood we spend millions of dollars beating each other up, and months from now have no new revenue and a homeless problem we haven’t even begun to work on,” O’Brien said in an interview Monday night. “It’s a very uncomfortable position to be in. But when I sit down and close my eyes, I think we’re better off stepping back.”

So the council didn’t want to waste money of a fight they didn’t think they could win. That seems sensible. Tax policies have implications. Amazon has always been willing to take tough decisions, so their threat to move could well have been deadly serious.

Here’s an example of a tough decision taken by Jeff Bezos: when Amazon was having trouble moving to API first software development (a design methodology for creating modular services rather than monolithic applications), Bezos issued a six point mandate, point 6 of which was “Anyone who doesn’t do this will be fired.”

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About jimbelton

I'm a software developer, and a writer of both fiction and non-fiction, and I blog about movies, books, and philosophy. My interest in religious philosophy and the search for the truth inspires much of my writing.
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