Jason Mercier of the Washington Policy Center discusses a valid concern other cities should keep in mind before following Seattle’s lead
Jason Mercier
Washington Policy Center
As expected, the state Court of Appeals today unanimously upheld Seattle’s employer compensation tax. Though the tax is a questionable economic policy, Seattle successfully threaded the legal needle to avoid the prior constitutional violations of its invalidated local income tax. From today’s Court of Appeals ruling:
“We conclude that the City’s payroll expense tax is an excise tax on businesses imposed under powers vested in the City by the state legislature and the state constitution. Engaging in business is a substantial privilege on which the City may properly levy taxes, and the use of a business’s payroll expense is an appropriate measure of that taxable incident. Unlike Cary, the City’s payroll expense tax is not a tax on employee income or the right to work for wages. Summary judgment in favor of the City was appropriate.”
Now that Seattle has received a green light for the employer compensation tax, expect conversations to quickly turn to how to increase it to respond to the city’s overspending-induced budget problem. As reported by the Seattle Times:
“’Structural problems require structural solutions, like Jumpstart, and as budget chair, that’s what I’ll be exploring as we head into the budget season this fall,’ Mosqueda said, committing to finding a ‘progressive’ revenue source, or one that is graduated based on income.”
Though some cities may take inspiration from Seattle’s tax victory and look to impose their own employer compensation taxes, pursuing this type of tax on a statewide basis was recently rejected by the Washington Tax Structure Working Group. The work group voted back in March to remove the following taxes from its possible list of recommendations to the legislature:
- Value Added Tax (VAT);
- Employer compensation tax;
- Flat or progressive corporate income tax; and
- Flat or progressive personal income tax.
The Tax Structure Work Group consultant’s report noted that Washingtonians were opposed to the tax because of “concerns that the employer compensation tax might hinder economic growth.”
A valid concern other cities should keep in mind before following Seattle’s lead.
Jason Mercier is the director of the Center for Government Reform at the Washington Policy Center.
Also read:
- Opinion: Let’s make Washington state affordable for everyone
Rep. David Stuebe criticizes state lawmakers’ spending increases and calls for tax relief, budget reforms, and restored funding for essential services across Washington. - Opinion: Legislature agrees to increased spending in Supplemental Budget
Washington lawmakers approved an $80.2 billion supplemental budget, banking on an income tax that is uncertain to withstand legal and electoral tests despite increasing spending beyond revenue projections. - Letter: ‘Only Florida has a more regressive tax structure than Washington’
Washington households earning the least pay 13.8% in taxes, while the wealthiest 1% pay only 4.1%, according to Camas resident Anthony Teso’s letter. - Opinion: ‘I-5 Bridge replacement plan does not accomplish the needs of the project’
Transportation architect Kevin Peterson outlines why the current I-5 Bridge proposal falls short on mobility, urban design, and transit, and offers alternative solutions including BRT and urban integration improvements. - Opinion: Two ways to keep right
Doug Dahl explains how Washington drivers must “keep right” differently depending on whether traffic flows in one direction or both, plus the exceptions that apply to two-way turn lanes.
wpDiscuz
