Seattle Chamber of Commerce sues city over new payroll tax

The Seattle Metropolitan Chamber of Commerce has filed a lawsuit challenging the massive big business-tax the City Council approved in July. 

The new tax, called "JumpStart Seattle," targets companies with payrolls above $7 million and is based on the salaries of employees who earn more than $150,000 a year. The businesses will be taxed 0.7% to 2.4% for each employee who meets the criteria. 

The chamber's lawsuit calls the tax "illegal, invalid and unenforceable" and maintains it is a tax on "the right to earn a living," which the state Supreme Court has ruled unconstitutional. 

"This illegal tax puts Seattle's economic recovery at risk, now and into the future," Alicia Teel, the chamber's senior vice president of public affairs and communication. "Our downtown core, where we had over 300,000 people coming to work and supporting small businesses in the neighborhood every day, is still reeling from the economic shock of the pandemic. This illegal payroll tax threatens to drive out the very jobs that create the revenue the city is hoping to restore."

The chamber says more than 200 businesses have permanently closed since the start of the pandemic, costing the city thousands of jobs. 

"People are avoiding downtown altogether and instead of asking how they can help, the City Council is adding another barrier to recovery with this tax," South Lake Union Chamber of Commerce Executive Director Danah Abarr said in a news release announcing the lawsuit. 

The tax is expected to raise more than $200 million a year. According to the council, the money will be used to underwrite $86 million in coronavirus relief to shore up city services as Seattle emerges from the pandemic and over the long term to pay for affordable housing, business assistance and community development.

It's different than the 2018 "head tax" that the council passed and later repealed. That tax, which applied to all employees at large companies, would have raised $47 million a year.

RELATED: Seattle City Council expected to pass largest tax on businesses in Seattle's history

The JumpStart tax was supported by several labor unions and affordable housing advocates. Mayor Jenny Durkan, who let the tax become law without her signature, warned in the summer that the tax could drive big businesses out of the city and could be challenged in court. 

The city attorney's office told The Seattle Times that they are still reviewing the lawsuit, but “we certainly intend to defend the City’s ability to impose this tax."