A new “Amazon tax” has recently passed in Seattle, which has some cities in California’s Silicon Valley considering a similar tax of their own. The city councils in Mountain View, which is home to Google, and Cupertino, which is home to Apple, are said to be considering imposing similar taxes.

Seattle’s new “Amazon tax” is also being referred to as a “head tax,” as it imposes a flat tax per employee. While the tax was likely created specifically to target Amazon, it affects other large corporations as well. All companies with more than $20 million dollars in annual revenue in Seattle must pay the tax. The annual head tax amount per employee is $275, down from the original amount proposed, which was $500.

What Is the Goal of This Tax?

 

This tax was likely created due to the fact that Amazon’s tax structuring and strategy has left them paying far fewer taxes that many other businesses. The goal of the tax is to bring more funding to some currently underfunded public initiatives, like transportation improvements and affordable housing.

This new head tax has been somewhat controversial. Some people say that this tax is necessary, as the rapid success and growth of Amazon has caused many issues in the Seattle area that need proper funding to be resolved. Others have said that this tax might stunt economic growth, as it is essentially a tax on jobs.

While there has been controversy around Seattle’s head tax, the city councils of Mountain View and Cupertino are considering imposing similar taxes.

Google Chief Executive Officer (CEO), Sundar Pichai

What Type of Taxes Are They Considering?

 

In Mountain View, home to Google, their city council is considering a head tax, but one that would tax companies of varying sizes differently. They are considering proposing a progressive tax that would see larger companies paying higher taxes than smaller ones.

In Cupertino, home to Apple, their city council is in the early stages of considering a head tax. The Cupertino city council is expected to continue to debate the positive and negative aspects of a head tax before deciding whether or not to put one on a ballot.

While Seattle’s head tax passed only a few weeks ago, theirs isn’t the first tax of its kind. Other cities with large corporate presences have previously passed head taxes of their own, including San Jose, Sunnyvale, and Redwood City.

Whether or not these head taxes are good for the economy of a city is up for debate. Many tax experts are discouraging of the trend, saying that it has great potential to push jobs out of cities with head taxes. Cities implementing these taxes, on the other hand, seem confident in their decision to do so, reasoning that it’s unlikely that any of these major corporations would find the tax financially straining enough to relocate.

Follow Vanguard Tax Relief’s blog to watch for updates on California’s head tax developments and keep up to date on other important tax news.