Taxing employers will prolong Seattle’s economic pain

A lawsuit challenging the Seattle City Council’s destructive tax on employers is welcome.

Residents of Seattle and the state of Washington should appreciate the clarity and attention the lawsuit will bring, especially as the Legislature considers a statewide version of Seattle’s latest tax on job creators.

Legal or not, creating an incentive that may move jobs elsewhere is a terrible idea at the worst possible time.

The Seattle Metropolitan Chamber of Commerce filed suit on Dec. 8, arguing that Seattle is illegally taxing the “right to make a living,” which is prohibited by a longstanding state Supreme Court ruling.

There may also be grounds to challenge the tax for violating the state Constitution’s uniform taxing requirement, which is intended to prohibit discriminatory taxation.

Seattle’s City Council tried repeatedly to impose a tax on employers, particularly Amazon, to further increase its revenue and make a political statement.

Labor organizations were looking for municipalities willing to float this approach, and Seattle took the bait, repeatedly.

That led to the 2018 ill-fated head tax. It drew widespread opposition and a referendum. When labor declined to support a pro-tax campaign, saving its powder for other races, City Hall backtracked and killed the tax itself.

This year, with the pandemic providing cover, the city council passed a variation crafted to thread the legal needle and reduce blowback. It excludes grocers, for instance, whose plight under the head tax stoked opposition.

Now dubbed a payroll tax, it applies to companies with payrolls over $7 million and at least one employee in Seattle paid more than $150,000. Rates range from 0.7% to 2.4%, depending on payroll and compensation.

Combined with Seattle’s already high business taxes and fees, and the City Council’s stubborn indifference to public safety problems and rampant property crime, this creates another incentive for companies to employ fewer people in Seattle — or worse, leave the city altogether.

The tax will generate a fraction of what’s needed for pandemic relief. Only the federal government can afford to give substantial relief.

If the tax suppresses the return of jobs to Seattle, it will prolong the economic pain long after everyone’s vaccinated.

This especially hurts lower wage workers — if upper-end jobs diminish, the impact will be felt by restaurant, retail and service-sector jobs.

Already more than 200 stores and businesses in Seattle closed permanently, and tens of thousands of jobs were lost to due to the pandemic, the Chamber’s lawsuit notes.

“Adding a new tax on jobs creates another headwind that could prove fatal to the recovery of downtown Seattle and the local business community,” it states.

Seattle desperately needs more common sense and reasonable voices to be heard. Now is the time for City Hall to support employers so the city can recover and again be a great place to start careers and companies.

Pay heed, Legislature.