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Dallas as the anti-Seattle? A pro-business climate may help Texas land Amazon's HQ2

Dallas Morning News, September 19, 2017

By: Mitchell Schnurman

Cities around the country were thrilled after Amazon said it was searching for a second headquarters location, but the Seattle establishment was shaken.

This “should serve as a wake-up call for the region,” the president of the Seattle Metro Chamber said in a statement.

And it “should come as no surprise,” she said, because “the city has continued to implement policies that create an environment that is at best unfriendly, and at worst, outright hostile toward the needs of our largest employers.”

That sounds harsh, especially from a pro-business group that promotes the region, but it’s a common conclusion. From a $15 minimum wage to mandates for paid sick leave to proposals for a capital gains tax, the regulations just keep coming in Seattle and Washington state.

In June, a soda tax was approved with a levy that’s eight times higher than one for beer. In July, an ordinance took effect that restricts scheduling changes at large restaurants and retailers and can require more pay for workers whose hours are extended or cut.

This summer, Seattle unanimously approved an income tax on earnings over $250,000, even though it was sure to provoke a legal challenge because Washington does not have a state income tax.

“It won’t be lost on historians that two months after City Hall cheered itself for ‘taxing the rich,’ Amazon chose to seek a ‘stable and business-friendly environment’ for its next act: A $5 billion investment and 50,000 new jobs,” wrote the editorial board of The Seattle Times.

A proposal for a head tax on workers in the city was adopted a decade ago, only to be repealed. But it keeps coming back.

“What have Seattle businesses done to deserve still more bills?” wrote the CEO of the Washington Retail Association last year after the head tax was put in play again.

Compare that approach with the pro-business policies in Texas. Tort reform, right-to-work laws, a low minimum wage, deregulation and light regulation are among the factors that make Texas a perennial top choice for corporate expansion and relocation.

In annual surveys of top corporate executives, Texas has been named the best state for business for 13 consecutive years. Washington ranked 39th in this year’s report in Chief Executive magazine.

Amazon has outlined a long list of attributes for what it’s calling HQ2, although it’s not clear which ones matter most. The more weight that’s given to the business climate, the better the chances for Dallas, Austin and other Texas metros.
It’s important to note that other major metros can brag about their own pro-business practices. Georgia, for instance, ranked No. 8 among the best states, bolstering Atlanta’s prospects. And Denver, considered a favorite, can tout 13th-ranked Colorado, which also has a cool factor that helps in recruiting.

The question is whether Amazon will be looking for an anti-Seattle, at least on the regulatory front.

Amazon didn’t air any grievances with its hometown in announcing the search for a second headquarters. Still, long-time observers distilled some deeper messages in the announcement and location documents, suggesting that Amazon wasn’t merely outgrowing the space in Seattle.

Part of what it’s looking for: “elected officials eager and willing to work with the company,” according to Amazon’s request for proposals.

“That’s a backhanded way of saying they’re not able to work with the establishment in Seattle,” said Paul Guppy, vice president of research for the Washington Policy Center, a conservative think tank in Seattle.

In general, employers in the Northwest are liberal about social issues, including benefits for same-sex couples and paid family leave, he said. But the constant stream of new requirements can be expensive and time-consuming.

“Employers are definitely fed up, but they’re very reluctant to say so, because they don’t want to be cast as mean capitalists,” Guppy said.

When some restaurant owners criticized the big jump in the minimum wage and warned that it would lead to fewer jobs, they faced a firestorm of criticism online. So they went silent, he said.

Texas has put its business-friendly brand at risk recently. This year, lawmakers adopted a law to prohibit sanctuary cities and repeatedly tried to pass a bill to restrict bathroom choices for transgender people.

Many employers, including Amazon, spoke out forcefully against the “bathroom bill” and managed to hold off the legislation. Amazon and its founder and CEO, Jeff Bezos, are clearly at odds with Texas political leaders on immigration, LGBT rights and climate change. But that may not be insurmountable.

“Controversial social issues come and go,” Guppy said. “But tax rates, mandated benefits, the business climate — those really hit the bottom line. They’re permanent and they’re real.”

Amazon said that it wants HQ2 to be the full equal of its Seattle base. Senior leaders will decide where to locate their teams, and employees are expected to have an option to move if they prefer.

If cost of living matters a lot, Dallas has a significant edge.

Kriss Sjoblom, senior economist at the Washington Research Council, expects Texas sites — perhaps both Austin and Dallas — to make the shortlist.

“There’s no state income tax and no inheritance tax,” he said, and no plans for new taxes.

In contrast, Washington already has the nation’s biggest estate tax, up to 20 percent.

For workers at a company like Amazon, that could make a difference.