Sawant, Morales revise and accelerate their “Amazon Tax” proposal

This morning, Council members Kshama Sawant and Tammy Morales unveiled an updated version of their proposal for an “Amazon tax,” re-tuned to provide relief for the COVID-19 pandemic.

I will write up a deeper dive later this week when the text of the new bill is revealed, but here are some headlines from their announcement today:

  • It is now proposed to be a 1.3% tax on “the corporate payrolls of for-profit companies whose payrolls are greater than $7 million annually.”  That is nearly double the 0.7% rate in their original proposal, and reflects their estimate of a 12% reduction in payrolls due to the shutdown.
  • Non-profits, public employers, and grocery stores would still be exempted.
  • Under their original proposal, the tax would go into effect on January 1, 2021. But with their new proposal it would start on June 1 of this year — though they said that the tax wouldn’t be due and payable until January 1.
  • Sawant and Morales expect that the top 2% of Seattle companies, as measured by payroll, will be required to pay the tax – about 800 companies. That includes Amazon, Facebook, Google and Microsoft, but also Nordstrom, Weyerhauser, Expedia, Starbucks, Holland America, REI, large hotels, Pagliacci Pizza, and many other companies whose businesses have been devastated by the shutdown.
  • They expect that the tax would raise $200 million in 2020, which would be spent on providing relief to up to 100,000 low-income households including those that have lost income due to COVID-19. The relief would come in the form of monthly $500 checks for four months. The program would prioritize “seniors; those that are undocumented, immigrants and refugees; individuals experiencing homelessness; working people who have lost incomes and become destitute as a result of the pandemic; and others who experience structural or institutional barriers to accessing support from the government.” Sawant and Morales did not specify the mechanism by which recipients would be identified, though Morales mentioned that they can leverage the existing city programs providing financial assistance to low-income families.
  • Since revenues wouldn’t be collected until 2021, their proposal also includes a $200 million inter-fund loan so they can begin distributing relief funds immediately.
  • Starting in 2021, the revenues would be spent as originally proposed: building affordable housing, and investments in Green New Deal projects.

Morales and Sawant intend to formally introduce the bill on Monday, but it is unclear whether the Council can move it forward now given the Governor’s proclamation that prohibits public agencies from taking “actions” except those for COVID-19 response or that are “necessary and routine.”  A new tax, with no expiration date, that is intended to raise hundreds of millions of dollars annually is hardly “routine,” and one that will spend the revenues on housing and Green New Deal programs in 2021 and beyond probably doesn’t pass the test for COVID relief simply because the first year’s revenues are dedicated to that purpose (and not even solely dedicated to that) — that would be an easy loophole to exploit in order for the Council to pass almost any bill just by attaching something COVID-related.

One can also question the fiscal responsibility of spending $200 million this year in anticipation of payroll tax revenues, when we don’t know how long the COVID measures will continue or how severe or long-lasting the impact will be on employment in Seattle — let alone whether Seattle employers, faced with an additional payroll tax, might decide to relocate employees they eventually rehire outside of the city limits. The COVID shutdown, combined with an “Amazon tax,” might lead to an employment boom in Bellevue.

More on Friday when the text of the bill is published.

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