On stage at Washington Hall, a historic venue in the heart of District 3, Seattle City Councilmember Kshama Sawant raised her left hand and took her oath of office. A packed crowd of supporters erupted into cheers.
When the socialist Sawant beat business-backed Egan Orion in a nail-biter of an election in November 2019 and won her third term, she became the longest-serving councilmember on the dais. She also came away with the political capital to relaunch her campaign to tax the biggest businesses in the city in the name of combatting homelessness and the rising tide of inequality that has flooded her district, forcing out historically marginalized groups to make way for whiter, wealthier newcomers.
Efforts to tax businesses in 2018 foundered under pressure from business entities and a reluctant mayor. That measure — alternately called the “employee hours tax” or the “employee head tax” (EHT) — would have raised roughly $47 million per year from 3 percent of companies in the city.
This time, Sawant wants to go bolder. In a one-two punch, Sawant proposed a ballot measure and legislation that would raise between $200 million and $500 million.
The next morning, in the heart of Amazonia — South Lake Union — a smaller group met over coffee and prepackaged pastries at Mary’s Place, a shelter for women and children just off Aurora Avenue. It was standing-room-only because there was only one chair in the midground “stage,” where a staff person sat after losing a battle with a zipper on his marigold-colored sweater.
He and three others acted out a quick skit in the style of Mr. Rogers before Mary’s Place representatives came out holding sections of a cardboard cutout of a trolley, triumphantly displaying their fundraising total of $3,069,447.85. Over 54 days, and with a great deal of support from business partners, Mary’s Place exceeded its $2 million goal for the annual “No Child Sleeps Outside” campaign.
That meant an additional 500 people would be able to access shelter and services to help them transition out of homelessness.
Looming large over Sawant’s rally and Mary’s Place’s victory party was a single entity: a company that directs 70 percent of the world’s web traffic and the future of groceries, a company that clocked $240 billion in revenues in 2018 — as well as its workers’ pee breaks.
Amazon looms large in any discussion of Seattle because it is both native son and foreign invader, benefactor and beast, the root of the city’s ailments and the solution to them. It contributes to the homelessness crisis through its dramatic wealth and resists efforts to siphon off a portion of the take to solve the problem. It directs rivulets of philanthropy to help a select few, enough to shore up its reputation but not enough to satisfy the need. It’s hardly the only corporate entity to do so.
This year, it seems, Seattleites want to blow up the whole dam.
Potential vs. problems
The Puget Sound region in general — and Seattle in particular — has a complicated fiscal challenge.
On one hand, many of the largest, most profitable companies on the planet either grew from its fertile intellectual and entrepreneurial soil or staked an outpost to take advantage of the spillover effects as companies began looking past California’s Silicon Valley for drearier climes.
On the other hand, state and local governments have largely failed to capture the immense wealth built on the foundation of public goods and amenities. In some notable cases, government action made it worse, showering public resources on companies in the name of economic development only to have them pocket their winnings and run.
Other company leaders chose a different path, establishing foundations and investing in solutions to problems locally and abroad. The Bill & Melinda Gates Foundation supports powerful journalism at home through The Seattle Times’ Project Homeless even as it tries to improve health and outcomes in far-flung communities.
But private entities, on their lonesome, cannot tackle systemic societal problems on their own.
They aren’t built to, said John Burbank, executive director of the Economic Policy Institute, a left-leaning think tank involved in drafting the former and current effort to tax big business in Seattle.
One prime example: Microsoft.
Microsoft leapt into the housing game in 2018, promising essentially $500 million in different types of loans to produce affordable housing throughout the region that it calls home.
“Our success has been fueled by the support of this region,” said Brad Smith, Microsoft’s president, at a January 2019 press conference. “We want our success to support the region in return.”
Things haven’t gone as planned, according to a Bloomberg article by business reporter Noah Buhayar. The company hasn’t found the kinds of investments it wanted — those close enough to its campus and targeted at the right price levels — and sufficient new housing is prohibitively expensive, even for such deep pockets.
The problem is one of incentives, Burbank said.
“Private enterprise is interested in making a profit off housing,” Burbank said. “They see housing as a market commodity. Government doesn’t see housing that way. They see housing as an essential need.”
Even if the money was given, not just loaned, it couldn’t produce what the community needs.
“There’s no way that philanthropy will be able to make up or meet the need of housing,” Burbank said. “What Microsoft and others should be doing is just paying more in taxes.”
But many major corporations just don’t have to.
In December 2017, the Trump administration won its first major coup. The Republican-held House of Representatives and Senate passed a tax overhaul projected to cost the nation $1.5 trillion over 10 years. They lowered the corporate tax rate from 35 percent to 21 percent, created loopholes for some personal businesses and put lipstick on the pig by lowering taxes by a pittance for the middle class.
In a particularly clueless tweet, former Speaker of the House Paul Ryan celebrated the bill by saying that a teacher in Lancaster, Pennsylvania, saw her pay go up $1.50 per week — enough to pay for her annual Costco membership.
Major corporations had much more to give thanks for. According to the Institute on Taxation and Economic Policy (ITEP), 379 profitable corporations they studied paid an effective federal income tax rate of 11.3 percent on their 2018 income, not the 21 percent advertised by the tax bill.
Ninety-one corporations, including Amazon, Chevron, Halliburton and IBM, paid nothing to the federal government that year, according to ITEP.
Amazon did pay roughly $250 million in state and local taxes in 2017, according to The Seattle Times, and $297 million in 2018, according to Geekwire. They are also the largest property taxpayer in Seattle due to their extensive holdings in the city.
The company committed $100 million over 10 years to Mary’s Place, some of which will go to the Family Center shelter built into the organization’s new campus, according to a company blog post.
These donations seem to go against Milton Friedman’s admonition that “few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”
Seattleites may disagree, because reducing the tax burden on large corporations has not meant the money is made up elsewhere, even when executives are inclined to philanthropic giving. And when they do give, large corporations known for their efficient allocation of resources tend to spend their philanthropic dollars in other ways.
It’s a phenomenon that scholar Lester Salamon called “voluntary failures,” a spin on the more traditional concept of “market failures,” where often a lack of information prevents markets from putting resources where they ought to, creating shortages.
Salamon broke “voluntary failures” into three pieces: philanthropic insufficiency, or not having enough resources; philanthropic particularism, when philanthropy is channeled to preferred or “deserving” groups; and philanthropic paternalism, consolidating power in institutions to amass personal power and influence.
While government is beset with its own biases and shortcomings, it is ultimately tasked with and accountable to the public good rather than the proclivities of founders and funders. If we want money spent efficiently on public welfare, businesses like Amazon are not the answer.
Had the EHT gone through in 2018 without challenge, that contribution would likely have been substantially more. Even at its lowest levels, Sawant’s new proposal would raise $2 billion in 10 years from the businesses it touches.
The actual bones of that plan have not been fully worked out, but the goal will be to target larger businesses with something on the order of $100 million in revenues, Burbank said. Such a restriction could cut off protests about hurting low-margin businesses at the knees, forcing larger corporations to show their hands.
Amazon, for its part, would not comment on the new effort without seeing the details.
A year ago, 30-year-old Rutger Bregman, a Dutch historian, took to the stage of the World Economic Forum for the rich and famous in Davos, Switzerland.
The attendees wanted to talk about philanthropy. They wanted to know how they could give to solve the world’s social ills.
Bregman was having none of it.
“It feels like I’m at a firefighters’ conference and I’m not allowed to talk about water,” Bregman said. “Just stop talking about philanthropy and start talking about taxes.
“That’s it,” he continued. “Taxes, taxes, taxes. All the rest is bullshit, in my opinion.”
Conservatives and government skeptics criticized, but at the end of the day, government is built to provide public goods that benefit large swathes of people.
Society does better when society allocates resources efficiently.
So, pay your taxes. It does the public good.
Ashley Archibald is a Staff Reporter covering local government, policy and equity. Have a story idea? She can be can reached at ashleya (at) realchangenews (dot) org. Follow Ashley on Twitter @AshleyA_RC.
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