New Seattle payroll tax introduced

Apr 16, 2020
Written by wpengine

Seattle City Councilmembers Kshama Sawant and Tammy Morales have introduced legislation to create a new city payroll tax.

If approved, businesses with annual payrolls in Seattle higher than $7 million would pay a 1.3% payroll tax. The tax is expected to raise $500 million annually. Sponsors of the payroll tax say that it would apply to about 800 businesses operating within Seattle.

This legislation could prove controversial. Two years ago, a unanimous Council passed a “head tax” to fund programs to address homelessness. Less than a month later, by a 7-2 vote, the Council repealed it when it became clear that Seattle voters overwhelmingly supported an initiative to repeal the tax.

There are several claims of note to mention in the bill that has been introduced for council consideration and possible eventual approval.

The sponsors say they introduced the tax proposal due to the virus-related civic emergency declared by Mayor Jenny Durkan. However, Councilmember Sawant started discussing a payroll tax months before the coronavirus pandemic. Earlier, she planned to introduce a .7% payroll tax that would raise $300 million. She has also raised the possibility of putting the payroll tax on the November 2020 general election ballot.

Perhaps in response to the earlier head tax experience, the payroll tax bill asserts that, if approved, the ordinance could not be overturned by a public referendum. Also, of note, an employee would not have to work in Seattle to be covered by the tax. An employee who lives in Seattle and does not work at least 50% of their time in another city, would be covered.

The State of Washington received $2.9 billion from the federal government’s COVID-19 stimulus. A portion of that funding is targeted to cities with populations of 500,000 or more. Seattle is the only Washington city that will qualify for that funding. At this time, it is not known how much stimulus funding Seattle will receive.

The Seattle Metropolitan Chamber of Commerce has announced its opposition to the payroll tax proposal. The Chamber maintains that the proposal is poorly timed because many businesses are suffering economically due to the COVID-19 pandemic and it could take months or years for the economy to rebound fully.

The Council’s Select Budget Committee is scheduled to receive an outline of the three bills related to the proposed payroll tax at 10 a.m. on April 22. The bills are CB 119772CB 119773CB 119774.

Council committee meetings are being conducted remotely and streamed live on the Seattle Channel. The public is able to watch via or by listen via the Council’s listen line by calling 206-684-8566.