Seattle City Council unveils new payroll tax targeting Amazon and other large companies

The Seattle City Council introduced a new proposal Tuesday to tax the largest companies in the city, the latest in a series of attempts to capture some of the wealth generated by Amazon, Expedia, and other big businesses to address critical challenges.

The proposal, introduced by council member Teresa Mosqueda, is similar in structure but more modest than competing legislation from council members Kshama Sawant and Tammy Morales. It would levy a tax on salaries exceeding $150,000 annually at Seattle’s largest companies. Businesses with total annual payroll expenses of $7 million or more would be subject to the tax.

The legislation establishes a tiered tax plan that breaks down like this:

• Companies with annual payroll of $7 million – $1 billion would pay a 0.7% tax on salaries between $150,000-$499,999 and a 1.4% tax on salaries greater than $500,000
• Companies with annual payroll exceeding $1 billion would pay a 1.4% tax on salaries between $150,000-$499,999 and a 2.1% tax on salaries greater than $500,000

The legislation only applies to the payroll of employees based in Seattle. It includes stock grants but does not apply to stock options which may or may not be exercised in the future, according to City Council staff.

The city estimates the taxes collected from companies below the $1 billion annual payroll threshold will generate about $173.5 million dollars each year. The City Council does not know how much additional revenue would come from taxes on companies with annual payrolls exceeding $1 billion annually because that data is confidential.

The legislation assumes that 3% of Seattle businesses will be subject to the tax. The tax sunsets after 10 years or if the county or state create a progressive revenue source that overlaps with the goals of the legislation.

Expedia is supportive of the legislation. GeekWire reached out to Amazon to comment on the proposal and will update this story if we hear back.

“While we are concerned about any new city tax in this period of economic uncertainty, this is a necessary conversation until progress can be made on state and regional solutions,” said Richard Lazaro, government affairs manager at Expedia Group, during a press conference Tuesday.

The City Council would initially borrow from emergency funds to provide COVID-19 relief and pay the money back with revenue from the payroll tax down the road. The funds would go toward small business grants, housing stability programs, and emergency grocery vouchers, among other programs. When the coronavirus crisis passes, revenue from the payroll tax would fund affordable housing and homeless services and economic and workforce development objectives.

The #JumpStartSeattle proposal we are announcing today:
1) Helps respond to urgent needs due to the COVID crisis this year; 2) Maintains essential services at the City so that our working families can have services like childcare, parks, safe streets, and libraries next year…

— Councilmember Teresa Mosqueda (@CMTMosqueda) June 16, 2020

Mosqueda said during a press briefing Tuesday that the legislation was developed with input from business and labor leaders, as well as social service advocates.

The Seattle City Council has been trying for years to pass a tax on Amazon and other large businesses in the city to alleviate the challenges of rapid growth, including a homelessness emergency that has proved difficult to solve. The effort stalled in 2018 after a protracted battle over the so-called “head tax,” which would have applied to large companies on a per-employee basis. The City Council unanimously passed the tax but quickly repealed it after facing opposition from the business community. Amazon was the most vocal opponent of the tax, threatening to slow its growth in Seattle if the legislation went forward.

In the wake of the head tax, Sawant doubled down on her “Amazon Tax” plan. Her proposal would raise an estimated $500 million per year. That legislation was on pause until recently due to procedural rules tied to the pandemic, but they were revised in early June.