City council ruling causes anger within tech sector and beyond.
Ever since Jeff Bezos grew his little online bookstore into a Midas-style money making machine, lawmakers have been scrambling for ways to get a piece of their profits. The wave of so-called “Amazon Taxes” that swept the country a few years ago was proof of that: states began introducing legislation to charge sales tax for online orders, a circumstance that had already been solidly determined by the Supreme Court in Quill v North Dakota, 1992. That ruling allowed that states could not collect sales tax for internet orders unless the retail maintained a physical presence in that state (and it’s why you may have seen order forms that say things like “Minnesota residents add 6% sales tax”).
Now, Amazon’s home city is holding out their hands for a piece of the profits with the introduction of Seattle’s “head tax.” This tax, unanimously approved by the city council, will charge companies with $20 million in annual revenue a $275 per-employee tax every year; it’s worth noting that the original proposal was changed after outcry from $500 per employee.
Of course, Amazon’s billions may have been the catalyst for this tax, but the company is by far not the only one who will be affected. There are nearly 600 businesses based in Seattle that now fall under the guidelines for this new tax, and a number of them bring in $20 million in revenue but not profit. A company that earns ten cents on the dollar, for example, will be hard hit by this kind of tax. According to an article in Inc., one grocery store has already said this will affect what perks they are able to provide for their employees–those pesky little bonuses like health insurance, for example–and other experts project that this will lead to job loss.
The reason city officials implemented the tax is noble, no doubt. With so many tech companies launching operations there and bringing in an influx of highly skilled professionals, there’s certainly enough money floating around for those with the most to chip in. The issue is this tax is being scorned as a band-aid solution to the gushing wound of homelessness. Even before the head tax was cut in half, the expected revenue from the new tax–earmarked for building affordable housing to alleviate the homeless epidemic–was not even going to put a dent in the 11,000-person statistics in the city.