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:

“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 (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.

The case is No. 20–2‑17576–5.