On Tuesday, the Washington State appeals court upheld the earlier ruling that the tax was legal, and Seattle’s “jump start” payroll tax on large enterprises will remain unchanged.
The Seattle City Council passed the Seattle quick start plan in 2020, which aims to provide more funds for housing projects and other urban services. This measure imposes a tax on the salaries of companies with an annual wage expenditure of $7million or more than $150000 per year, and brings in $248.1 million in income in 2021, which is $48.1 million more than expected.
Shortly after the passage of the bill, the Seattle metropolitan chamber of Commerce filed a lawsuit in the King County High Court to stop taxation. The lawsuit alleges that the city illegally taxed the “right to earn a living”, citing the precedent of Cary v. Bellingham, in which the Supreme Court of the state of Washington ruled that the city could not tax the ability to earn a living.
Earlier this month, the King County Court dismissed the lawsuit, and the Washington state court of Appeals has now upheld the ruling.
The court of Appeal ruled that “the city’s payroll tax is easily distinguished from the tax levied in Kari, where the income based tax is levied on employees, and the payroll tax here is levied on the enterprise itself”. “We conclude that the New York City payroll tax is a consumption tax levied on businesses in accordance with the powers vested in the city by the state legislature and the state constitution.”
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According to a statement by CEO rachelsmith, the Seattle chamber of commerce is reviewing this decision and “will consult with our members and lawyers to determine our next steps”. She pointed out that according to a recent voter survey commissioned by the chamber of Commerce, most Seattle voters believe that the city tax is too high.
The survey also found that the same proportion of respondents (about 60%) believed that the city needed more funds to solve the problem of homelessness.
Most of the $200million raised by Seattle will be used to fund affordable housing projects in the city. About 20% of the tax will be used for environmental and economic development projects, including labor training and childcare.
Tax rates vary, with the largest companies paying the most. According to the forecast figures released in March this year, jumpstart is expected to bring more than US $277million in revenue in 2022, US $43.6 million more than expected.