(AP Photo / Elaine Thompson, File)
In early June, a King County judge dismissed a Seattle Chamber of Commerce lawsuit seeking to overturn the city’s “JumpStart” tax. Now the chamber is filing its action before the Washington State Court of Appeals.
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The tax was passed by city councils in July 2020 and collects a tax on companies with payrolls in excess of $ 7 million. Under the measure, qualifying companies will be taxed 0.7% for each employee who earns more than $ 150,000 and 1.4% for employees who earn more than $ 500,000.
The Chamber of Commerce alleged in its lawsuit that the tax violated the Washington state constitution and violated the right of residents of the state to earn a living wage.
“We filed this lawsuit because payroll tax is illegal – it doesn’t meet the precedent set by the Washington State Supreme Court,” Chamber President and CEO Rachel Smith said in a press release.
In her ruling that denied the lawsuit in King County Court in June, Judge Mary Roberts disagreed with that reasoning because the JumpStart tax is collected directly from qualifying companies and does not actually affect individual employee salaries. She also noted that city governments have extensive powers to tax businesses.
The JumpStart levy is already having a huge impact on Seattle’s future spending plans, with its estimated funds largely going into the city’s 2021 budget for COVID-19 relief and homeless relief efforts. A proposed amendment to the statutes of a coalition called Compassion Seattle – which, incidentally, is backed by the Chamber of Commerce – would also seek to divert tax funds to fund an expansion of homeless shelters.
The taxation of large companies has also been a frequent source of conflict within the town hall. In early 2020, Councilors Kshama Sawant and Tammy Morales initially proposed a more expansive 1.7% excise tax on just over 800 Seattle businesses, excluding nonprofits, small businesses, grocery stores, and government and educational employers.
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Months later, Seattle councilors Lorena Gonzalez and Teresa Mosqueda blocked the move, with Sawant declaring she was “completely stunned and scandalized” at the time. Mosqueda proposed their JumpStart corporate tax two months later, which the council would eventually pass with broad support (including from Sawant and Morales).
In mid-July of that year, Mayor Jenny Durkan refused to sign the tax, claiming it would “ultimately affect Seattle’s ability to recover from the economic devastation caused by COVID-19”. With a veto-safe majority of the city councils, the draft law came into force after a certain waiting period, despite the mayor’s objections.
The Chamber of Commerce finally filed its lawsuit in December 2020 for a full waiver of the tax. The lawsuit will now go to the state appeals court, which will review the “application of the law” of the King County Superior Court.