Seattle payroll tax moves forward

by GSBA Staff
| Jul 13, 2020

Since 2018, GSBA has given the Seattle City Council and the Mayor feedback on the impact that a head tax or payroll tax would have on small business. Our position has always been that any tax leveraged against business would be most effective at the state or regional level, should provide support for small business, and should be tiered. Whether or not this is a wise time for a new tax, GSBA also recognizes the large budget shortfall our city is facing and the need for revenue to fill in that shortfall, help in the recovery and address our long term housing and homelessness crisis. 

After Councilmember Mosqueda introduced the JumpStart payroll tax, GSBA expressed concern of how a tax levied in a time of economic crisis could negatively impact Seattle by resulting in businesses either leaving the City or not bringing back all employees. After lengthy discussions with our Public Policy Council and Board and doing a membership survey, GSBA worked closely with Councilmember Mosqueda to try and minimize the impact that this bill would have on mid-sized businesses as well any negative trickle down it could have on small businesses. Although GSBA still believes a regional tax would be best, our membership did express support for new revenue; although it was split on whether or not the JumpStart bill was the best way to bring in new revenue. There were some aspect of the final version of tax mechanism that passed that we were not pleased with, including a lengthier sunset provision than originally proposed. 

We will continue to work with the City Council on how funds raised will be invested back in the community, most especially to support the recovery of small business.

Below are the details of the bill that was passed with a 7-2 vote.

The City will start assessing this tax in 2021 and will start collecting it in 2022. A quick reminder of which businesses with employees in Seattle qualify for this tax, and the rates they will pay:

For businesses with Seattle payrolls of $7M to $99.9M:
- No tax on salaries under $150,000
- 0.7% tax on salaries of $150,000-$399,999
- 1.7% on salaries over $400,000

For businesses with Seattle payroll between $100M and $999.9M:
- No tax on salaries under $150,000
- 0.7% tax on salaries of $150,000-$399,999
- 1.9% tax on salaries over $400,000

For businesses with Seattle payrolls of $1B or more:
- No tax on salaries under $150,000
- 1.4% tax on salaries between $150,000 to $399,999
- 2.4% tax on salaries over $400,000

City Council is introducing the separate ordinance to cover the spending package on Monday, July 13, which will be voted in committee on Wednesday, July 15, and presumably face a final vote in full Council chambers on Monday, July 20. Our priorities remain ensuring that funding intended to support the economic resiliency of small businesses in their recovery from the pandemic is actually used to support those small businesses.