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BOHANON & CUROTT: How a new Seattle tax can work in Indy’s favor

May 25, 2018

Economic Analysis by Cecil Bohanon & Nick CurottThe City Council of Seattle recently passed a controversial tax that attracted national attention, and what happened next could be good news for central Indiana’s quest to snag Amazon’s second national headquarters.

Earlier this month, Seattle enacted a 14-cents-an-hour tax on wages paid by firms with $20 million or more in annual revenue. The tax is projected to raise $48 million a year. The proceeds are to be used for low-income housing and aid for the homeless.

Amazon Inc. employs 40,000 workers in Seattle—a full 10 percent of the city’s workforce. To no surprise, Amazon and several other large Seattle employers objected to the tax. An Amazon spokesperson condemned the city’s “hostile approach and rhetoric towards larger business.” Yes, fleecing large employers while simultaneously judging them to be moral reprobates for daring to object does not make for a favorable business climate.

To add to the drama, the Center for Popular Democracy spearheaded an open letter to the residents and leaders of Seattle. The letter, signed by a number of elected officials from around the country, offered “strong support” for the Seattle tax. The letter went on to condemn Amazon’s opposition to the tax, stating that the company “decided to be part of the problem not the solution.” Interestingly, the letter’s signers included a number of elected officials from Denver, Miami, Chicago, New York, Austin and Dallas—but thankfully none from Indianapolis. All the above-mentioned cities are among the finalists for Amazon’s second national headquarters.

That elected city officials would pile on Amazon over the Seattle tax is a rather clear signal about the business climate in those cities. We suspect the open letter palpably lowers the odds of those cities being selected, which would improve the odds for Indianapolis.

Given Indianapolis’ business-friendly environment, it’s not a surprise no one from the city signed the pile-on letter. We have cautioned the powers that be in central Indiana not to “give away the farm” to lure Amazon to our region. With competitor cities supporting the misguided Seattle tax, maybe Indianapolis won’t need to shower Amazon with incentives to win the headquarters prize. Good luck, Indy!•

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Bohanon and Curott are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.

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