Dan Price of Gravity Payments has given employees making under $100,000 a two percent pay raise

Startup companies tend to operate in a bubble outside of the policies in Washington D.C. But the recent battle in Congress over the so-called fiscal cliff is having real impact, largely through the expiration of the payroll tax holiday.

By allowing the payroll tax relief plan to expire, Congress ensured that all wage-earners will see taxes go up by two percent, from 4.2 percent to 6.2 percent. That means someone making $50,000 will earn about $1,000 less this year — real money that could impact the ability of Americans to buy goods, save for college or invest in the stock market.

Dan Price, the CEO of Seattle-based Gravity Payments, a nine-year-old payment processing company, didn’t like the sound of that.

“We don’t think it is the right time to be raising taxes in a regressive way on workers,” Price tells GeekWire.

So, even while the tax relief is expiring, the company has decided to immediately institute a two percent pay raise for all workers making under $100,000. That applies to the majority of the company’s nearly 100 employees.

This is the first we’ve heard of such a plan by a Seattle company to offset the tax hikes on workers (let us know of others), but Price says he’s hoping that it becomes a trend.

“The payroll tax is regressive and is the tax that most hits everyday people,” said Price, adding that he decided to “put my money where my mouth is.”

According to the Tax Policy Center, of those Americans who make between $20,000 and $30,000 a year, 66.9 percent pay more in payroll tax than income tax. In other words, it tends to hit poor Americans harder.

The New Yorker offers a critical analysis of why President Obama conceded ground on the payroll tax in the latest fight with Congress, noting that it amounts to a middle-class tax hike that could send the country back into recession. Write Amy Davidson:

“Perhaps Democrats need to do with payroll taxes what Republicans did when they started calling the estate tax the “death tax”: find a new way of talking about it that makes the stakes vivid. What is depressing, though, is that when the party did fight for the payroll tax cut, last year, they won, largely because of public opinion. They managed to make the hypocrisy of Republicans who fought for the wealthy but let taxes rise on the poor clear. They can do it again.”

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Comments

  • Guest

    Why the picture of O in the article???

  • Guest

    The payroll tax, which is how people pay for their Social Security, was temporarily reduced during the recession. It was never meant to last forever.

    • http://www.facebook.com/dan.seattle Dan Price

      Agree with you sir, but it still stands that folks take home pay would go down and I didn’t want that to happen. Especially in the case that someone was budgeting tightly for whatever reason and would have a hard time affording it.

  • http://twitter.com/puckyourself Joe McGrath

    Jesus is this article poorly written and slanted. That New Yorker piece is tragically misguided. The country is still hemorraging money, and not even Obama’s original plan to tax the rich addressed that (it covered 8 days of the annual budget, and nothing of the existing debt). For the demographic you are speaking to, the bulk pay no federal income taxes, so of course they pay more in a tax for their social security taxes (and the pyramid scheme deficit of the social security fund makes what Madoff did look like child’s play, I might add). The tax is not regressive at all, it is flat, and it is based on what you are allowed to receive from social security once you are eligible.

    An opinion piece from the New Yorker should never be a reference, unless you clearly don’t care about being taken seriously.

    • Sandy

      Since when is any internet article considered journalism anymore, Joe?

    • http://www.facebook.com/dan.seattle Dan Price

      Hi Joe, Thanks for your comments. FYI, I am not trying to make a political statement with my actions, I just didn’t want our team to have a take home pay decrease. I would have extended the raise to everyone, but couldn’t afford to do it for folks making over 100k (though obviously I value them immensely as well). On our team contains single mothers, young couples saving for a down payment, folks paying student loans, etc and living in Seattle can be expensive. Just didn’t want folks to get set back. Hope you understand, but I do appreciate the discussion.
      Dan

    • http://twitter.com/rlucas Randall Lucas

      Joe, there’s just a flat-out arithmetical untruth in your comment. You say “[t]he tax is not regressive at all, it is flat,” but the FICA tax (which goes to Social Security) applies only to the first $110k of wages. It is, therefore, a textbook case of a regressive tax.

      Folks can argue over the “shoulds” of the matter, but the math is quite clear.

      PS, kudos to Dan.

  • Guest

    Thank you, Gravity, for countering the punch in the gut Obama just dealt to the middle class.
    I’ve said it before and I’ll say it again, Mr. President: tax the rich — not me.

  • Guest

    John, sorry if this offends you but sometimes you are writing that make think: I wish I could have that time I read this back.
    Come on man, you can do better than that. I know you do

  • Jimmy

    I have to hand it to this startup….Genius from a PR perspective. They truly understand how craven and shallow the press is and how schmaltzy moves like this really get picked up. I bet you’ll see this all over the media. In the war for talent this kind of stuff makes a real difference. Maybe.

    • http://www.facebook.com/dan.seattle Dan Price

      Hey Jimmy! It’s fun that people think what we did was interesting, but for the amount of money this will cost, there are many cheaper and more effective gimmicks. I guess as long as we are doing it though, a bit of coverage can’t hurt. The thing I am most excited about is that some of my friends that run much larger companies are going to do the same in response. It’s like our own private stimulus plan except it costs the government and the tax payers nothing. On the other hand, many companies can’t afford to do this, so I won’t criticize anyone who doesn’t, but I will congratulate those that do.

    • Chris Wilson

      Although I agree that this is great for PR, I’ve actually met the CEO Mr. Price as we grew up in the same town and have several mutual friends, and I can tell you confidently that he did not do this for the PR, but legitimately cares enough to try to take care of his employees.

    • http://www.facebook.com/gapang777 Garrick Pang

      If more CEO’s cared about their employees as this courageous young buisness owner seems to, our world would be a better place and the sad state of “corporate greed” would be a thing of the past. Well done Mr. Price. PR might be an added blessing, but kudos to you for this bold and generous move.

  • Peter H

    Is this the only raise they are giving this year? If so it doesn’t even keep up with inflation. Nice PR move and way to play the press. I thought GW was smarter.
    Is there any critical thinking present in this article at all?

    • guest

      The folks working in the operations side of the business actually averaged a 14% pay raise last year. Pretty good for such a small business.

    • chris wilson

      Although I agree that this is great for PR, I’ve actually met the CEO Mr. Price as we grew up in the same town and have several mutual friends, and I can tell you confidently that he did not do this for the PR, but legitimately cares enough to try to take care of his employees.

  • Peter H

    BTW, let’s put this “fair share” tripe behind us. The bottom 60% of income (which includes the middle class) have a positive ROI on taxes they pay. http://www.forbes.com/sites/timworstall/2012/07/15/the-real-middle-class-tax-rate-is-minus-5-percent/

    The “middle class” pays a tax rate of negative 5%, when benefits are considered. The bototm 20% pay -301%. Only the top 40% of earners have a positive tax rate.

    http://www.forbes.com/sites/timworstall/2012/07/15/the-real-middle-class-tax-rate-is-minus-5-percent/

    The government spends $1 for every $0.60 it takes in — so they are borrowing 40c on every dollar to give us all these benefits. Someone has to pay that back some day. That’s the real problem to focus on – but we’d rather get distracted with this one company’s 2% raise.

  • http://twitter.com/fijiaaron Aaron Evans

    But raising income 2% isn’t the same as taxing 2%.

    If you made $50,000 when Social Security Tax was 4.2% (actually 10.4%) your income after withholding was $47,900.

    If you get a 2% raise and now make $51,000 with Social Security Tax at 6.2% (actually 12.4%) your income after withholding is $47,838 – a difference of $62.

    Nice, but not a total offset.

    • Sandy

      Social Security is supposed to take 6.2% for the retirement program. It is not a tax but a contribution to a program that you hopefully live long enough to collect from later on in life. The White House calls it a tax now so they can “give you a tax break” when in reality it is stealing from the Social Security program when the Social Security program is already overburdened. If the administration wants to give tax breaks, let them give tax breaks, not rob SS and pretend they are cutting taxes. Aaron, 2% of $50,000 is $1,000. You pay 6.2% to Social Security and your employer pays the other 6.2%. Whether or not the $1,000 is a total offset or not doesn’t matter. You should have been paying the 6.2% all along, and this isn’t an increase in taxes, it is just an expiration of a deferral moratorium. I am sure it is considered a very thoughtful gesture by the employees of Gravity. Are they complaining? I should hope not! Check your math, Aaron, where does 6.2 get to be 10.4?

      • Drew

        Call it a tax, fee, whatever you want. If you’re paying into a government program its still a social program. You’re still paying in “for the greater good” and hoping that some day it comes back to you.

    • Drew

      I’d imagine they rounded for simplicity. If I were working there I wouldn’t be complaining about the $62 bucks.

    • chris wilson

      Although you are correct, I feel like you’re digging pretty deep to try and lessen the positivity that this company is attempting to create.

  • Guest

    While I agree with some of the comments here on the quality of this article, most miss the larger point. A small start-up owner does not agree with the recent legislation and has decided to do something about it in the form of giving most of his employees a pay raise to help offset the lost take home income.

    I applaud his ability to first recognize his sphere of influence and second take action within that sphere to offset what he feels is a poor decision by our government. All political viewpoints aside, this guy is trying to make a positive impact at a local level. If more people focused on how they can actually make a positive contribution instead of simply sitting back and complaining, the workforce of America would be better for it.

  • http://www.facebook.com/therealgeorgemunro George Munro

    It’s nice to see a Washington company taking the lead on this issue. Most of the comments seem to miss the broader point that a small business in our backyard is going above and beyond to ensure their employees aren’t adversely impacted by the malaise that has settled in over Congress.

  • Will Andrews

    Dan, you don’t need to defend yourself or your motives for your actions. Your track record speaks for itself. Just let the emotionally charged comments (some good and some not so good) fly. At the end of the day the question I pose to anyone who wants to speak against your actions is this: have you ever created 100 jobs? I’d venture to say that the vast majority of people who would speak against you could only answer “No.” For those of you who don’t have the privilege of knowing Mr. Dan Price, let me highlight a few things about this amazing man. At age 15 he was making a name for himself in Sun Valley, ID and began building his business from there. He wrote and executed his first business plan before the age of 20, he is considered a pioneer and an expert in his field and is only 28 years old, his company consistently gives to charities across his community and the world. This guy is legit. He is the guy that we conservatives want to protect because he is the guy who takes risk and others benefit from what he does. His business is founded on the principles of transparency, fairness, and customer service. The guy had an unmatched source of energy and is constantly looking to do more and give more back. He never brags about himself nor does he work for accolades. He simply is one of those guys who just wants to be the best at everything he does and take care of as many people as possible. Keep at it Dan and don’t let any naysayers deter you from what you are doing.

  • Reader

    Nothing wrong that CEO decided to give 2.1% or 2.1114% extra to some
    employees and wants maximize with PR. Good move for him with getting
    some attention.

    I will call it a good ROI.

    It is
    journalist’s expertise level to differentiate between real news and
    promotion of little thing. John just felt into a little “trap”, or may
    be it was intentional help to his friend Dan. But we as a readers lost
    here because expected free advertisement will be in the designated spot
    on this page and not were we expected to read some news.

    Disgusting and reduces the credibility of the writer who works hard but sometimes hurts himself badly when has a poor judgement

    • johnhcook

      Thanks for the comment. I thought it was an interesting story that a startup company in Seattle was giving a pay raise to its employees to offset a political decision made in Washington D.C. Sorry you didn’t like the story, and I hope you’ll find other stories of interest on GeekWire.

      We do occasionally write feature stories about companies when we find what they are doing of interest, and think others might find them interesting too. We also write about layoffs, venture capital financing deals, mergers, executive appointments and even Steve Ballmer’s new haircut.

      Every story is different, and we like to offer readers a wide array of content.

      Is this good PR for Gravity?

      Perhaps. But are we only supposed to cover things that are negative — like layoffs and lawsuits. I think that would be a pretty boring site, frankly.

      I noted in the story that Gravity Payments’ effort here seemed unique, and therefore I felt compelled to cover it. I also asked readers to tell me if they knew of any other similar efforts in the region, and I’ve heard of none. That makes it unique, and a good story for GeekWire to cover.

      Thanks for reading.

  • http://www.facebook.com/charles.bender Charles Bender

    Dan, I applaud the dedication you demonstrate to your employees. It takes a special type of leader to take action rather than just complain. Politics aside, this type of outreach to your employees will make your team stronger and more loyal. In the long run your company and its customers will benefit.

  • http://www.facebook.com/gapang777 Garrick Pang

    Well done Dan, thanks for helping us “little guys”. I don’t work for you, but it’s encouraging to see a CEO being proactive and caring about his employees.

    Sad to see so many who are more concerned about politics than people feeling like they have to slam the writer of this article because he is speaking the truth of how these policies are hurting us lower income earners during time when many (most) of us still really need the relief.

    Keep up the good work. I hope your business continues to prosper because of your caring about BOTH employees and customers! See this great article in the Seattle daily paper: http://seattlepi.nwsource.com/business/367984_gravity23.html

  • http://www.facebook.com/people/Martin-Tobias/1406231168 Martin Tobias

    Nice play Dan. Still happy with your Obama choice? All that tax the rich BS is now being exposed for what it really is. BS. There is not enough money in the “rich” to pay for all that spending so yea, EVERYONE is paying more. And to compensate good folks like you have to increase wages. Glad your business is healthy enough to afford it. How many in this economy are? Our President has sold even his most ardent supporters a bill of goods and we are all paying the price. Now that he doesn’t have to run for re-election, get ready for the real whippings to begin. You shall reap what you sow….

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