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King County judge upholds payroll tax for Seattle corporations that pay high salaries

A lawsuit challenging the JumpStart Seattle tax was filed after it was approved last year. The tax applies to businesses that spend $7 million or more on payroll.

SEATTLE — A King County Superior Court judge has dismissed a lawsuit challenging a payroll tax passed last year by the Seattle City Council that will tax businesses that spend $7 million or more on payroll in the city.

Seattle City Councilmember Teresa Mosqueda proposed the JumpStart Seattle tax in 2020 as a way to generate revenue to help the city recover from the economic impacts of the coronavirus pandemic

The payroll tax, approved in July 2020, was strongly opposed by the Downtown Seattle Association and the Seattle Metropolitan Chamber of Commerce that said the city should not be passing taxes during an economic crisis. 

The chamber filed a lawsuit against the City of Seattle challenging the tax and argued it was unconstitutional. On Friday, King County Superior Court Judge Mary Roberts dismissed the lawsuit and ruled it is within the city's authority to tax businesses. 

"We are disappointed by the court’s decision," said Seattle Metropolitan Chamber of Commerce President and CEO Rachel Smith in a statement Friday. "We believe our lawyers presented a strong case for why this tax on employee compensation goes beyond the city’s authority, and we are working with our legal team to explore next steps. We remain committed to being a champion for members on this issue. We filed this legal challenge as part of our duty to fully vet policies that impact the business community."

"The top priority for the Chamber and our members is a strong and inclusive economic recovery," Smith continued. "Today’s ruling underscores the need for the city to put forward a sustainable recovery plan to emerge from the pandemic and revitalize our region. The projections for the JumpStart Tax depend on businesses reopening and many more people coming back to work in Seattle. We stand ready to collaborate with city leaders on good policy."

Under the legislation, businesses with payrolls of $7 million or more that offer employees annual salaries of less than $500,000 but more than $150,000 will be taxed 0.7%. The tax is 1.4% for companies paying employees $500,000 or more. 

Councilmember Mosqueda, who was the lead sponsor of the legislation, previously said the payroll tax could generate as much as $200 million a year. 

Mosqueda issued a statement Friday saying in part, "I am glad to have this frivolous challenge behind us, since the reality is the opponents say they want the same investments JumpStart will fund: more affordable housing, pathways out of homelessness, and economic resilience for our local economy. We now have the assurance that this progressive revenue stream is coming as we seek to respond to the crises worsened by COVID-19."

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