Tech

Seattle passes payroll tax targeting Amazon and other big businesses

Key Points
  • The Seattle City Council passed the JumpStart Tax, a payroll tax on the city's biggest businesses and highest earners, including Amazon.
  • The legislation uses a tiered system of taxation, with the highest level designated for companies with annual payroll expenses of more than $1 billion.
  • It represents a major blow to Amazon,  which fought the passage of a so-called head tax in 2018.
Amazon CEO Jeff Bezos
The Washington Post | Getty Images

Seattle's City Council has approved a new tax for the city's biggest businesses and their highest earners, such as Amazon.

Called the "JumpStart Seattle" tax, the bill passed late Monday on a 7-2 vote and is expected to go into effect in 2021. Money from the tax will initially be used to fund coronavirus relief but will eventually go toward addressing housing and homelessness in Seattle. 

Under the measure, businesses with at least $7 million in annual payroll expenses will be taxed 0.7% to 2.4% on the amount they pay Seattle-based employees, with tiers based on individual salary amounts above $150,000. The highest bracket targets companies like Amazon with annual payroll expenses above $1 billion. Those companies will be taxed 2.4% for employees making more than $400,000. 

The decision is a blow to Amazon, which fought the passage of a so-called head tax in 2018 via a well-financed referendum campaign alongside other Seattle businesses. After the head tax was repealed, councilmember Kshama Sawant pushed to revive discussions around a big business tax with her "Tax Amazon" campaign. The JumpStart tax is more aggressive than the "Tax Amazon" legislation, which sought to apply a flat 0.7% payroll tax on big businesses. 

Amazon declined to comment on the JumpStart legislation.

Councilmember Teresa Mosqueda, who introduced the JumpStart legislation, said the tax's approval is a "big step towards creating a progressive tax system that works for all." The tax didn't garner support from Seattle's business community, however, with the Greater Seattle Chamber of Commerce saying the tax "pins Seattle's economic future on local businesses remaining strong, at a time when the depth and breadth of the crisis is still unfolding."

The passage of the JumpStart tax could further accelerate Amazon's move to secure office space outside of Seattle. 

Amazon maintains an expansive Seattle footprint, but in recent years, it has moved to establish a presence in areas outside of the city. Amazon said last month it would lease 111,000 square feet of office space in Redmond for 600-plus employees. The company also has an office in suburban Bellevue, where it is building a 43-story tower, its largest yet.

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