Seattle housing advocates want to qualify a measure for the November ballot that would levy another payroll tax on high-earning employees at Amazon and other large businesses, even as the city is seeing departures from the e-commerce giant and other high-profile tenants.

If passed, Initiative 137 proposed by House Our Neighbors could bring in upwards of $50 million a year for the acquisition and construction of affordable housing by enacting an “excess compensation” tax on businesses with employees making over $1 million a year, according to city documents.

The proposal appears to be among the first local efforts in the United States to tax companies with millionaire employees with the goal of raising funds to fight homelessness and build affordable housing, and comes as Amazon and other tech companies are expanding rapidly in nearby Bellevue, a suburb that has emerged as a business-friendly alternative to Seattle.

It’s not the first time officials have targeted companies as a source of housing funding in Seattle, a city where extreme wealth and extreme poverty often coexist on the same block and camping tents line some streets below new luxury apartment towers.

In May 2018, the Seattle City Council passed an annual head tax of $275 per employee on large companies to fund services for the homeless — and repealed the measure a month later under pressure from Amazon and other businesses. Two years later, the council passed Jumpstart Seattle, another levy aimed at Amazon and other big companies that is based on the number of highly paid employees rather than total workers.

Critics of such measures claim the taxes are responsible for pushing tax-generating companies out of the area to more business-friendly cities like nearby Bellevue, or fast-growing states like Arizona and Tennessee.  

Morgan Burbridge, a Colliers broker who represents office tenants in Seattle and Bellevue, said raising business taxes could have a chilling effect on the Puget Sound region's efforts to retain and attract tech companies and other businesses that are the backbone of the area's economy.

"If we’re always talking about income taxes and head taxes, it gives companies the impression that we’re not business friendly, that things could change in the near future," Burbridge said in an interview. "It’s counterproductive and it definitely creates headwinds to recovery and growth."

Initiative 137 is the latest plan to tax companies with high earners in the corporate home of Amazon, where Google, Facebook and other tech companies and other industries also have a major presence. The group must collect more than 26,000 valid signatures by June to put the measure on the Nov. 5 ballot.

The new measure aims to enact a 5% payroll tax on companies with annual employee salaries above $1 million to provide permanent funding for a new housing development authority that Seattle voters approved last year. The tax, if approved, is aimed at funding development of 2,000 affordable housing units in the city over the next decade.

The proposal could also add fuel to the yearslong debate about the potential economic effects of imposing such taxes on companies, and in some cases, real estate transactions.

In Los Angeles, a new city transfer tax, nicknamed the "mansion tax," on property sales above $5 million is being used to develop affordable housing, assist tenants through eviction defense and even help struggling landlords of affordable properties in the city. The measure has brought about confusion over who should pay the tax, and also served as a potential added headwind to real estate investment, some critics say.

Initiative 137 comes amid a slow recovery from the COVID-19 pandemic in Seattle, where the central business district's office vacancy rate shot up to nearly 28% from less than 6% before the pandemic, according to CoStar data. Seattle's office vacancy rate rivals downtown San Francisco’s 30% and is higher than the downtown L.A. office vacancy rate of over 18%.

Downtown Seattle weekday foot traffic remains just above half of where it was in 2019, despite Amazon’s requirement last May that all of its office employees work in company offices at least three days a week.

Amazon and other businesses have shed downtown office space amid job cuts and hybrid work arrangements, even as many of the e-commerce and tech titan's 50,000 Seattle employees have returned to its corporate headquarters at least part time.

Amazon in recent years has moved thousands of employees from Seattle and other locations to nearby Bellevue across Lake Washington.

The fast-growing city has resisted imposing a tax on high earners such as Seattle's proposed Initiative 137 or the Jumpstart levy passed in 2020 that requires businesses with at least $7 million in annual payroll to pay a tax for all their Seattle employees who make at least $180,000 a year.

The company now has more than 12,000 employees in downtown Bellevue. The suburb has ranked among the best performing and fastest growing U.S. office districts since 2021, according to CoStar data, with expansions in recent months by TikTok parent ByteDance and Pokémon, among other companies.

Amazon plans to more than double its Bellevue presence to 25,000 jobs in the coming years, about half of the company's 50,000 corporate employees in Seattle.

“Amazon’s continued investment in Bellevue is a vote of confidence for our city, the excellent talent pool, and quality of life that Bellevue offers,” Bellevue Mayor Lynne Robinson said in a statement. “The company continues their commitments to affordable housing and local nonprofit organizations, and investments in local infrastructure. Amazon exemplifies what productive public-private partnerships can look like.”

The expansion into Vulcan Real Estate's West Main and 555 Tower office and retail developments in Bellevue is part of a natural progression of growth across the region by Amazon, which considers itself a Puget Sound-based company, Amazon spokesperson Zach Goldsztejn told CoStar News in an email.

"Bellevue provides more space for us to create good jobs, and offers a business-friendly community with great amenities, a high quality of life and a fantastic talent pool," he said.

Goldsztejn did not respond to requests to comment on the proposed ballot measure and how it could impact the company's operations in Seattle.

The total amount of leased and occupied downtown Bellevue office space has increased by 2 million square feet over the past three years, mostly due to expansions by Amazon and other tech companies, according to Elliott Krivenko, director of market analytics for CoStar in Seattle.

Downtown Seattle has lost 4.4 million square feet of leased office occupancy during the same period, he added.

“Bellevue has a reputation for being the more business-friendly city, and clients tell us that’s why downtown has seen the greatest increase in occupied office space over the past few years, while Seattle's central business district has seen the greatest decrease,” said Krivenko.

Amazon has focused most of its office expansion outside Seattle since the city passed Jumpstart, two years after a failed attempt by the city council to levy a "head tax" on major employers that drew national headlines.

"There’s no doubt that Bellevue has an advantage over Seattle," Burbridge said. "There's less homelessness, and the impression is that it's more favorable for business."

It's not just Bellevue that has benefited from Amazon's real estate diversification.

The company last year opened Metropolitan Park, the first phase of its second headquarters in northern Virginia known as HQ2, and an operations headquarters in Nashville, Tennesee, after the e-commerce giant launched one of the most high-profile real estate site searches in history more than five years ago.

Seattle's previous efforts to tax high earners have fallen flat with the business community, including Amazon.

The Seattle Metropolitan Chamber of Commerce challenged the Jumpstart tax in court, but a King County Superior Court judge dismissed the case in 2021. The tax has since become Seattle's largest single source of funding for affordable housing, accounting for $240 million of the housing office's budget between 2022 and 2023, according to city documents.

The proposed Initiative 137 is familiar to Seattle real estate and business leaders. The Seattle Metropolitan Chamber of Commerce describes the proposal as "another tax-first, plan-later" scheme that includes a "blank check to be paid by residents of Seattle."

Seattle voters last spring approved an initiative by House Our Neighbors that created a city public development authority to build, maintain and operate publicly subsidized housing. Initiative 137 would create a permanent funding stream for the new authority.

"Voters should be wary of supporting a hypothetical business plan for a new, opaque and seemingly unprepared governmental entity," Chamber President and CEO Rachel Smith said in a statement. "Voters want more housing, not more housing entities.”

House Our Neighbors Director Tiffani McCoy countered that the initiative will fund the creation of 2,000 affordable housing units over the next 10 years.

"The funding source behind the initiative makes sense because rich businesses can afford to chip in to help others afford a home," McCoy said in an email.