
Jason Mercier of the Washington Policy Center discusses a valid concern other cities should keep in mind before following Seattleās lead
Jason Mercier
Washington Policy Center
As expected, the state Court of Appeals today unanimously upheld Seattleās 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 todayās Court of Appeals ruling:

āWe conclude that the Cityās 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 businessās payroll expense is an appropriate measure of that taxable incident. Unlike Cary, the Cityās 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.ā
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 cityās overspending-induced budget problem. As reported by the Seattle Times:
āāStructural problems require structural solutions, like Jumpstart, and as budget chair, thatās what Iāll be exploring as we head into the budget season this fall,ā Mosqueda said, committing to finding a āprogressiveā revenue source, or one that is graduated based on income.”
Though some cities may take inspiration from Seattleās 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.Ā Ā
The Tax Structure Work Group consultantās report noted that Washingtonians were opposed to the tax because of āconcerns that the employer compensation tax might hinder economic growth.ā
A valid concern other cities should keep in mind before following Seattleās lead.
Jason Mercier is the director of the Center for Government Reform at the Washington Policy Center.
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https://www.clarkcountytoday.com/opinion/opinion-seattle-gets-green-light-for-employer-compensation-tax-but-state-tax-work-group-not-interested/