SEATTLE — A King County judge has tossed a lawsuit against Seattle’s new tax on high-earning workers at large businesses, ruling that it is within the city’s authority to tax businesses.
The Seattle Metropolitan Chamber of Commerce had challenged the tax, arguing it was a tax on employees and calling it “illegal, invalid, and unenforceable.”
King County Superior Court Judge Mary Roberts on Friday sided with the city, ruling the tax applies to businesses, not their employees, and “is a constitutionally permissible excise tax on the privilege of doing business,” The Seattle Times reported.
The tax, which passed in 2020, is expected to generate over $200 million a year to pay for affordable housing, community-led development, local business assistance and Green New Deal investments.
“Our success in this lawsuit wasn’t in doubt considering the Legislature’s express authorization to impose a progressive tax like this, coupled with precedential case law,” Seattle City Attorney Pete Holmes said in a statement.
Seattle City Councilmember Teresa Mosqueda, the tax’s lead sponsor, called the lawsuit frivolous.
It was the City Council’s second try at imposing a tax on big businesses. The city passed a tax in 2018, but repealed it under pressure from the business community.
Under the new tax, businesses with at least $7 million in annual payroll will be taxed at rates of between 0.7% to 2.4% on salaries and wages paid to Seattle employees who make at least $150,000 per year.
The 2.4% rate, which is meant to apply to a company such as Amazon, will be levied on salaries of at least $400,000 at companies with at least $1 billion in annual payroll.
Under the tax, a company with an $8 million payroll and a single employee making $180,000 would pay a tax of 0.7% on that one salary — or $1,260.
Rachel Smith, president and CEO of the Seattle Metropolitan Chamber of Commerce, said they “are working with our legal team to explore next steps.”
