SEATTLE — After intense lobbying by local businesses and a bold threat by Amazon to curtail development in its hometown, the Seattle City Council on Monday approved a smaller and more limited tax on big companies than originally envisioned.
The new tax — dubbed the “Amazon Tax” by locals — will fund affordable housing and homeless services in a city whose economic boom, driven in no small part by Amazon, has priced many residents out of the area and forced some onto the streets.
Amazon, which halted two major expansion projects in Seattle in protest over the larger tax increase, said it was disappointed even with the smaller tax package, although the company said it would restart the planning process for one of its new buildings. It was still exploring the possibility of subleasing a second building that a developer is currently building.
The council had originally considered an annual “head” tax of $500 per full-time employee for Amazon and other large employers, but the amended measure that passed reduced that figure to $275. Instead of the $75 million a year the tax was originally expected to raise, it will bring in less than $50 million. The council also included a sunset provision that would require the tax to be reauthorized in five years.
The compromise failed to defuse tensions between Amazon and the city it has called home for the last 24 years.
Even though the company decided to resume one of its building projects, Drew Herdener, an Amazon vice president, said in a statement, “We remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.”
But the company’s tactics in Seattle has also garnered concern among other cities bidding to bring Amazon’s second headquarters to town.
Twenty finalist locations across North America have been aggressively wooing Amazon to win up to 50,000 high-paying jobs that its second headquarters would bring. In some of those places, there is opposition growing over the tax incentives that some city and state governments have agreed to give Amazon in return for being selected. And Amazon’s hardball politics in Seattle has further soured some local leaders.
“I absolutely find it unacceptable to see politically threatening behavior as is occurring there,” said Robin Kniech, a member of the City Council in Denver, one of the finalists for Amazon’s second headquarters. “It certainly doesn’t send a message that you expect to be a part of the community.”
Ms. Kniech was one of more than 50 local lawmakers in the United States who sent an open letter to Seattle leaders and residents on Monday supporting the tax and criticizing Amazon’s resistance to it.
“By threatening Seattle over this tax, Amazon is sending a message to all of our cities: we play by our own rules,” the letter said.
The unanimous vote in favor of the amended tax proposal occurred at a raucous public meeting at which advocates for the homeless and affordable housing — some holding placards saying “Tax Amazon” — argued in favor of a stiffer tax on the company and other businesses. Representatives of businesses warned that the tax would drive employers out of town, while others speakers questioned whether Seattle’s city government could be trusted to spend the additional tax revenue wisely.
Mr. Hederner, the Amazon vice president, said sharp increases in the city of Seattle’s revenues have outpaced the population growth of the city during the same period. “The city does not have a revenue problem — it has a spending efficiency problem,” he said. “We are highly uncertain whether the City Council’s anti-business positions or its spending inefficiency will change for the better.”
The lower tax was the result of feverish negotiations over the weekend between members of the City Council and Seattle’s mayor, Jenny Durkan, who had opposed the council’s earlier tax proposal. The mayor had publicly hinted that she would veto the original tax proposal because of the risks she said it posed to the local economy.
Several members of the nine-person City Council said they were reluctantly voting in favor of the smaller tax because there were not enough votes to override a mayoral veto of the larger tax plan.