5 Years Later - What was the result of the Amazon Tax in Seattle?
Checking in on the tax that was set to combat homelessness.
The JumpStart Payroll Tax was passed in Seattle on July 6, 2020 to “fund affordable housing and combat homelessness” by taxing corporations with payrolls over $8.5 million. It targeted companies like Amazon.
So five years later, what happened?
The tax brought in new money at first. It raised $231 million in 2021, $293 million in 2022, and $310 million in 2023. That was new additional tax money. Everything looked good at first.
But with the new revenue, Seattle spent heavily on affordable housing projects, poured millions into climate programs and small business grants, and then started using large chunks of the tax to plug holes in the general fund when other revenues fell short. They burned through the money as fast as it came in, expanding spending instead of fixing the budget.
But now Seattle is facing a $247 million budget shortfall over the next two years. As KIRO 7 reported: “This is catastrophic.”
Why? Because companies responded by leaving. Amazon moved 25,000 jobs to Bellevue. Meta cut 3,600 jobs. Expedia cut 1,500. Other companies froze hiring or quietly moved out.
Seattle taxed its economic engine, and the engine left.
Instead of using the new tax to stabilize the budget, the city just spent more. Now that tax revenue is flattening, the spending binge is catching up with them.
If this continues, the payroll tax could shrink enough to flip into a net loss within two to five years.
But what about the main goal — reducing homelessness?
In 2019, Seattle and King County counted 11,199 people experiencing homelessness. By 2024, that number had jumped to 16,868. That is a 51 percent increase since before the tax passed.
So to sum it up — Seattle raised taxes, spent every dollar of new revenue, drove out jobs, blew up its budget, and made homelessness worse.
So what can we/I learn from this?
Raising tax rates does not guarantee more revenue or better results. This is one of the biggest misconceptions that I had for my entire life. In many cases raising taxes actually drives away jobs and weakens the economy and ultimately reduces the tax revenue in the long run. This is very counterintuitive but Seattle just proved it. Again.