Amazon fires back at Seattle's proposed head tax, pauses construction projects

by KOMO Staff

Amazon Spheres in Seattle (KOMO Photo)

SEATTLE -- Amazon is flexing its muscles making its opposition known to a proposed Seattle tax by bringing a halt to all planning on a massive project scheduled for construction in Downtown Seattle, and may tweak its plans to occupy a new downtown skyscraper.

“I can confirm that pending the outcome of the head tax vote by City Council, Amazon has paused all construction planning on our Block 18 project in downtown Seattle and is evaluating options to sub-lease all space in our recently leased Rainier Square building," says Amazon Vice President Drew Herdener.

The proposed "head tax" would apply only to those companies with $20 million or more annually in taxable gross receipts as measured under the City’s Business and Occupation tax. The city estimates that will be 500 businesses, including Amazon. Those businesses would be charged 26 cents per hour per employee up to $500 maximum per employee per year. Amazon would pay more than $20 million under the proposal, according to the Associated Press.

The tax is expected to raise $75 million per year, which the city says 75 percent would go toward affordable housing.

"From our small businesses to our start-ups, our jobs are critical to our City's economy, budget, and growth. Our workers add to the vitality of our region and support our arts, cultural, and non-profit community. I'm deeply concerned about the impact this decision will have on a large range of jobs - from our building trades, to restaurant workers, to nurses, manufacturing jobs and tech workers," Seattle Mayor Jenny Durkan said in a statement released to the media. "At the same time, our City must urgently address our homelessness and affordability crisis and lift up those who have been left behind. I fundamentally believe we can do both by working together. In the upcoming days, I will be bringing together Councilmembers as well business, labor and our community leaders to work together to see how we might forge common ground in dealing with our challenges while keeping jobs."

WATCH: Seattle City Council Town Hall on proposed head tax:

Two supporters of the tax, City Council members Kshama Sawant and Mike O'Brien, seemed unmoved by Amazon's decision.

"I understand Amazon doesn't like it. I'm sure they would love to go to a city that has no taxes. And maybe they will find that place," O'Brien said.

O'Brien said he met with Amazon officials Wednesday morning. "I want to work with you, I would love for you to continue to grow in Seattle, but I need your help solving this crisis."

Added Sawant, "Amazon is perfectly capable of paying that, double, even four times that."

She also called Amazon's tactic "extortion."

City Council member Lisa Herbold has also supported the tax.

“Who loses? Low-income people lose, and we have an increase in homelessness," she said.

When asked if the city loses when jobs leave Seattle, Herbold responded “Again I'm hopeful that we’re going to come out of this with not only an understanding of the problems but an understanding of the solutions.”

Later, the sponsors of the tax on the council, including O'Brien, Herbold, M. Lorena Gonzalez and Teresa Mosqueda, issued a statement defending the tax and saying that Amazon should pay.

“While Amazon didn’t single-handedly cause this problem, they have contributed to the growing income inequality, displacement and housing affordability issues facing our City. That is precisely why -- in their visits with 20 other cities -- Amazon has sought to speak with elected officials about plans to proactively address those consequences. It seems only fair that as so many struggle to make their way through a tax system that’s rigged in favor of large corporations, that we ask those same corporations to financially contribute to the public health and housing solutions designed to address those consequences.

“Greater shared responsibility equals greater shared prosperity for all, businesses and residents alike.”

News of Amazon's decision broke as there was a rally for the tax outside City Hall.

Jon Scholes, president of the Downtown Seattle Association, said the City Council should take heed of Amazon's decision.

"Amazon’s growth in the heart of the city has had a significant economic benefit for small, medium and large businesses in Seattle across a number of sectors. A pause in that growth will be felt by many - from construction workers to hotels to small businesses. This news should serve as a wake-up call to those proposing a risky plan to tax jobs in Seattle."

Gov, Jay Inslee's office said it hopes "there will be ongoing dialogue between the city government, the city’s taxpayers and businesses."

The Block 18 project at 7th and Blanchard is expected to house thousands of Amazon employees in the new 405,000 square foot building. The company had also leased the entire 722,000 square feet of office space inside the future Rainier Square skyscraper but now says it will also explore subleasing the space instead if the tax goes forward.

Amazon was expected to house 7,000 jobs between the two projects. The company recently announced 3,000 new jobs in Vancouver, B.C. and 1,000 more in Boston. And the business world is on pins and needles to see where Amazon will select to house its second headquarters and its proposed 50,000 new jobs.

The Seattle City Council is expected to vote on the tax proposal on May 14. The tax, if passed, would likely go into effect on Jan. 1. A similar measure failed to pass last year.

Poll: Do you agree with Amazon's decision to halt construction until the head tax is decided? Answer the poll below or click here.

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