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Chamber sues to stop Seattle’s new payroll tax on large companies

Seattle’s budget for 2021 includes fewer cutbacks than expected from the financial impacts of the COVID-19 crisis. Part of that is due to improving economic forecasts. The city’s new tax on its largest businesses planned to go into effect in January has also been key with an expected more than $200 million boost funding social and pandemic recovery programs in the city.

But Tuesday, the Seattle Metropolitan Chamber of Commerce, the city’s largest business group, announced it has filed a lawsuit to block the Jump Start tax revenue program.

“This illegal tax puts Seattle’s economic recovery at risk, now and years into the future,” a group representative said in a statement on the lawsuit. “The Seattle City Council overstepped when they rushed this tax through. By playing fast and loose with its taxing authority, the Council added another headwind to Seattle’s economic recovery.”

Under the new tax plan passed this summer, beginning January 1st, Seattle companies with payrolls $7 million and up will be taxed on pay to employees making more than $150,000 per year. The tax rate ranges from 0.7% to 2.4% with tiers for various payroll and salary amounts. It is expected to generate more than $200 million a year for for a city facing a massive COVID-19 crisis-ripped hole in its budget forecasts and in desperate need of revenue for hoped expansion of housing, business assistance, and community spending. Late amendments approved included an expanded 20-year sunset clause that puts the tax in place for two decades. Grocery businesses and independent contractors are exempt.

The chamber’s lawsuit alleges that the city unlawfully imposed a tax on “the right to earn a living,” and cites the precedent of Cary v. City of Bellingham in which the Washington Supreme Court ruled a city could not tax the ability to earn a living.

The chamber says this is the third tax passed by Seattle in four years “to draw a lawsuit.”


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