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: Not guilty verdict appropriate resolution in case of VPD officerClark County Today Editor Ken Vance offers his praise to the jury in the trial of Vancouver Police Officer Andrea Mendoza.
- Opinion: Union greed closed schools in Port AngelesLiv Finne of the Washington Policy Center offers a recent example to remind others that strikes by public school employees are illegal under state law.
- Opinion: Earth Day 2024 – Time to admit that government-run environmentalism is failingTodd Myers of the Washington Policy Center says that much of what we hear on Earth Day and throughout the year regarding the environment will continue to be mere puffery.
- Opinion: Where do we go from here at Ridgefield School District?When it comes to the Ridgefield School District bond proposal, Heidi Pozzo believes the message should be clear: people are unhappy their perspective is not being heard and considered.
- Letter: Officer Mendoza stood up for public safetyClark County Public Safety Alliance Co-Founder Ann Donnelly provides context of support for Officer Andrea Mendoza.