King County Superior Court Judge Mary Roberts heard oral arguments Friday in a lawsuit filed against the city of Seattle over its JumpStart payroll tax on high salaries at big businesses.
The suit was filed in December by the Seattle Metropolitan Chamber of Commerce. Roberts said she would issue a ruling by the end of next week.
Lawyers for the chamber have characterized the tax as one on the right of workers to earn a living while the city said it is a tax on the city’s biggest businesses.
The suit was filed five months after Seattle City Council pushed through the payroll excise tax on companies with highly paid employees.
The tax, passed on July 6 in a 7-2 vote, is expected to generate more than $200 million in 2021 to help cover revenue lost due to the coronavirus pandemic. It was considered a breakthrough in a long-running debate at City Hall about how to address the housing and homelessness crises that have in recent years accompanied Seattle’s tech-business and construction boom.
The council and Mayor Jenny Durkan passed a per-employee “head tax” on large corporations in 2018 that would have raised $47 million per year. But they repealed that measure less than a month later under pressure from Amazon, other businesses and many voters, with critics warning the tax could discourage job growth and raising concerns about inefficient spending.
The chamber and others in Seattle’s business community argue that the new tax violates the state constitution and threatens to undermine the city’s recovery from the pandemic.
Under the tax, businesses with at least $7 million in annual payroll will be taxed 0.7% to 2.4% on salaries and wages spent on Seattle employees who make at least $150,000 per year, with tiers for various payroll and salary amounts. For example, a company with an $8 million payroll and one employee making $180,000 would pay a tax of 0.7% on $180,000 — or $1,260.
The 2.4% rate will apply to salaries of at least $400,000 at companies with at least $1 billion in annual payroll. Stock grants would be taxable, but not stock options, council staff have said.
Information from The Seattle Times archives is included in this report.