Chamber Files Lawsuit Against Seattle Payroll Tax

By: Editorial Staff Posted: 12/08/2020

Tax is Illegal, Creates Headwinds for Economic Recovery, Slows Return of Downtown Core

Today, the Seattle Metropolitan Chamber of Commerce filed a lawsuit against the Seattle City Council’s recently passed payroll tax in King County Superior Court, citing the need to protect local businesses, particularly in the downtown core.

“This illegal tax puts Seattle’s economic recovery at risk, now and years into the future,” said Alicia Teel, the Chamber’s senior vice president of public affairs and communications. “The Seattle City Council overstepped when they rushed this tax through. By playing fast and loose with its taxing authority, the Council added another headwind to Seattle’s economic recovery.”

More than 210 stores and businesses have permanently closed in Seattle since the start of the pandemic, along with tens of thousands of jobs. City budget projections warned that a payroll tax would “add to business costs, possibly slow down the employment recovery, and make Seattle less attractive relative to other cities in the region.”

Teel said, “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 lawsuit alleges that the city unlawfully imposed a tax on “the right to earn a living,” citing the precedent of Cary v. City of Bellingham in which the Washington Supreme Court ruled a city could not tax the ability to earn a living. This is the third tax passed by Seattle in four years to draw a lawsuit.

“Business in my neighborhood is at a standstill, with many of our small businesses having to close their doors permanently,” said Danah Abarr, executive director of the South Lake Union Chamber of Commerce. “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. Our businesses need this tax to end if we hope to recover any time soon.”

“Even though this tax is not targeted at small businesses like mine, we are all going to be negatively impacted by this tax,” said Justin Young, owner of Flow Fitness. “The tax is shortsighted and doesn’t account for the risk of jobs migrating out of Seattle. Seattle leaders should be listening to the concerns of local businesses and working together to solve them, rather than adding more obstacles to the recovery of a downtown core that is reeling from the economic shock of an ongoing pandemic.”

As representative of more than 2,600 businesses in the region, the Seattle Metro Chamber filed the lawsuit as members raised concerns about lasting damage from an illegal payroll tax to Seattle’s status as a world-class city of the future.

“We could be building a long-term strategy to move this region forward,” said Teel. “Instead, the City Council is operating off on its own, and is producing policies that discourage investment in one of the most diverse economies in the world and limits Seattle’s extraordinary potential.”