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The City of Seat­tle has the legal author­i­ty to levy an excise tax on annu­al pay­rolls of $7 mil­lion or high­er with employ­ees who make $150,000 or more annu­al­ly, a King Coun­ty Supe­ri­or Court judge ruled today, dis­miss­ing a legal chal­lenge against Coun­cilmem­ber Tere­sa Mosqueda’s Jump­Start rev­enue ordi­nance in a land­mark win for the City Coun­cil and the peo­ple of the Emer­ald City.

“The City has author­i­ty to tax all busi­ness activ­i­ties in the City,” Judge Mary Roberts ruled in a signed opin­ion. “The pay­roll expense tax is an excise tax mea­sured by pay­roll expens­es and paid by busi­ness­es that engage in busi­ness with employ­ees in the City. Employ­ees do not pay the tax.”

“The court con­cludes that the pay­roll expense tax is a per­mis­si­ble tax on the priv­i­lege of doing busi­ness. The court rules, as a mat­ter of law, that the City’s pay­roll expense tax is a valid excise tax on busi­ness under the tax­ing author­i­ty grant­ed to cities by the Wash­ing­ton State Con­sti­tu­tion and statutes.”

The Court took no posi­tion on the wis­dom of the ordi­nance, Roberts not­ed, only its legal­i­ty. Roberts grant­ed the City’s motion to find the tax con­sti­tu­tion­al, and ordered that the Seat­tle Met­ro­pol­i­tan Cham­ber of Com­merce’s com­plaint for declara­to­ry judg­ment and all its claims be dis­missed with prejudice.

The Cham­ber, whose mem­ber­ship includes cor­po­ra­tions that would pay the tax, decid­ed to file a legal chal­lenge after the Coun­cil approved the ordinance.

The Cham­ber has the option of appeal­ing Roberts’ rul­ing, but it would have to per­suade the appel­late courts that Judge Roberts erred in reach­ing her con­clu­sions. We agree with City Attor­ney Pete Holmes that Seat­tle is on firm legal ground and well posi­tioned to con­tin­ue to pre­vail should an appeal be filed.

Here is Roberts’ decision:

Judge Mary Roberts’ rul­ing in Seat­tle Met­ro­pol­i­tan Cham­ber v. City of Seattle

“Con­grat­u­la­tions to the broad swath of Seat­tle small and large busi­ness own­ers, res­i­dents, hous­ing and home­less­ness advo­cates, labor unions, equi­ty-based orga­ni­za­tions, envi­ron­men­tal orga­ni­za­tions, and more, who helped me intro­duce and pass Jump­Start Seat­tle, for yet anoth­er vote of con­fi­dence in our pro­gres­sive rev­enue pro­pos­al,” said prime spon­sor Coun­cilmem­ber Tere­sa Mosque­da.

Councilwoman Teresa Mosqueda takes her oath of office in 2017
Coun­cil­woman Tere­sa Mosque­da takes her oath of office in 2017 (Pho­to: Seat­tle City Coun­cil, repro­duced under Cre­ative Com­mons license)

“This is anoth­er vic­to­ry for the res­i­dents of Seat­tle led by the City Attor­ney’s office, who was instru­men­tal pro­vid­ing coun­sel while draft­ing the bill, and now defend­ing the law,” Mosqueda’s state­ment added. “I am glad to have this friv­o­lous chal­lenge behind us, since the real­i­ty is the oppo­nents say they want the same invest­ments Jump­Start will fund: more afford­able hous­ing, path­ways out of home­less­ness, and eco­nom­ic resilience for our local econ­o­my. We now have the assur­ance that this pro­gres­sive rev­enue stream is coming.”

Seat­tle Cham­ber CEO Rachel Smith said the orga­ni­za­tion will con­sid­er its options. The Cham­ber could file an appeal, as not­ed above, or accept Roberts’ decision.

“We are dis­ap­point­ed by the court’s deci­sion,” said Smith in a state­ment.

“We believe our lawyers pre­sent­ed a strong case for why this tax on employ­ee com­pen­sa­tion goes beyond the city’s author­i­ty, and we are work­ing with our legal team to explore next steps. We remain com­mit­ted to being a cham­pi­on for mem­bers on this issue. We filed this legal chal­lenge as part of our duty to ful­ly vet poli­cies that impact the busi­ness community.”

“The top pri­or­i­ty for the Cham­ber and our mem­bers is a strong and inclu­sive eco­nom­ic recov­ery,” Smith added. “Today’s rul­ing under­scores the need for the city to put for­ward a sus­tain­able recov­ery plan to emerge from the pan­dem­ic and revi­tal­ize our region. The pro­jec­tions for the Jump­Start Tax depend on busi­ness­es reopen­ing and many more peo­ple com­ing back to work in Seattle.”

“We stand ready to col­lab­o­rate with city lead­ers on good policy.”

Orig­i­nal­ly approved last July, the Jump­Start rev­enue plan suc­cess­ful­ly over­came oppo­si­tion both from with­in City Hall and beyond it.

May­or Jen­ny Durkan vetoed the ini­tial ordi­nance, but a super­ma­jor­i­ty of the Coun­cil over­rode the veto and passed an amend­ed ver­sion of the plan.

The plan’s sup­port­ers include orga­ni­za­tions like El Cen­tro de la Raza, Wash­ing­ton Low Income Hous­ing Alliance, Seat­tle-King Coun­ty Coali­tion on Home­less­ness, Hous­ing Devel­op­ment Con­sor­tium of Seat­tle King Coun­ty, Enter­prise Com­mu­ni­ty Part­ners, the Church Coun­cil of Greater Seat­tle, Ply­mouth Hous­ing, Youth­Care, the Arc of King Coun­ty, and Sol­id Ground, along with MLK Labor, IUPAT Dis­trict 5, UFCW Local 21, UNITE Here Local 8, and many oth­er labor unions.

The fact sheet below from the coali­tion that assem­bled to sup­port the ordi­nance explains its pur­pose and how the invest­ments will improve Seat­tle’s qual­i­ty of life.

Jump­Start Seat­tle one pager

The case is No. 20–2‑17576–5.

About the author

Andrew Villeneuve is the founder and executive director of the Northwest Progressive Institute, as well as the founder of NPI's sibling, the Northwest Progressive Foundation. He has worked to advance progressive causes for over two decades as a strategist, speaker, author, and organizer. Andrew is also a cybersecurity expert, a veteran facilitator, a delegate to the Washington State Democratic Central Committee, and a member of the Climate Reality Leadership Corps.

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