House Bill 1839 would bring in over $200 million a year for higher education in by closing a tax loophole benefiting Amazon and Microsoft.
In the recent February 11 election, Seattle voters backed social housing in a landslide and roundly defeated the attempt by Amazon and Microsoft to block a tax on excessive compensation exceeding $1 million annually. The tax was designed to catalyze mixed-income integrated affordable housing for Seattle residents and workers and garnered a landslide 26-point victory.
Amazon and Microsoft each donated $100,000 to back Proposition 1B, which was engineered by the Seattle Metropolitan Chamber of Commerce to derail the grassroots social housing measure and the tax that funded it. Microsoft president Brad Smith contributed $10,000 of his own money to defeat affordable housing for workers just last month.
Now is a good time to shine a spotlight on the tax benefits that these two Trump-genuflecting companies have lobbied for themselves. In so doing, they have extracted hundreds of millions of dollars from the state of Washington, depriving the citizens of our state of educational opportunity.
An education surtax with an Amazon and Microsoft loophole
In 2019, the Washington State Legislature considered a surtax on businesses which benefited from the education of tech-savvy workers. The tax intended to fund workforce education to train Washington students for Washington jobs.
Microsoft and Amazon were all onboard. Brad Smith, authored an op-ed in the Seattle Times proposing to increase the business and occupation tax rate for these businesses from 1.5% to 1.8% and even more so that the “largest tech companies would pay somewhat more than the 1.8 percent rate.” In the original legislation, this would have created a 2.5% tax on Amazon and Microsoft.
All the Democrats were on board, and the legislation sailed through the House Finance Committee. But something funky and hidden was inserted into the bill along the way, thanks to the efforts of a newly resigned Democratic state senator, Guy Palumbo, who then went to work for Amazon’s lobbying shop. The amendment, approved by Democrats, capped the surcharge for businesses with more than $25 billion in receipts at $7 million (later amended to $9 million in 2020).
Two companies were the primary beneficiaries: Amazon and Microsoft. Their total haul from this loophole was estimated at more than $460 million between 2019 and 2025.
Now, State Representative Julia Reed (D-36th, Ballard) wants to close this Amazon/Microsoft tax loophole. Her bill, HB 1839, simply eliminates the loophole. This would bring in over $200 million a year for higher education. With that, the state could reduce tuition across the board by $530 per student, and expand the college grant so that it actually helps middle class students.
A crisis in college enrollment
We have a funding crisis in higher education while Washington faces a projected shortfall of nearly 600,000 credentialed workers over the decade. However, undergraduate enrollment has dropped since 2019 by 83,000 students. That means that Washington has one fifth fewer students now than six years ago. One major barrier to enrollment is rising tuition. Since 2019, average net price to students at Washington’s public institutions has increased by nearly $2,500, a 26% jump.
Democrats patted themselves on the back with the inception of the college grant program, saying this program helps out middle class students with tuition. It has been rhetoric, not reality. Full tuition through the College Grant program is only for students with family incomes up to 60% of the state’s median income – no more than $67,000 for a family of three. If your family income is 91% of the median, you receive a 10% discount on tuition. If your family is right in the middle, you get nothing. No wonder enrollment is dropping.
Will the legislature act on this? So often these past five years I have heard legislators defend the loophole for Amazon and Microsoft by saying “we made a deal” for their support. So they might just continue to coddle Amazon, with its profits increasing from $225 billion in 2022 to over $311 billion in 2024 and Microsoft, with its profits increasing from $135 billion to $171 billion. These are the companies that stood behind Donald Trump and funded his inauguration festivities. They are the oligarchs that seek to circumvent democracy.
We should put democracy first. It will make a lot more sense to have a deal with the voters and students and future students of our state, by closing this egregious loophole for corporate oligarchs.
John Burbank (Guest Contributor)
John Burbank is the founder and retired executive director of the Economic Opportunity Institute in Seattle.
