Fighting back against what it calls a “headwind to Seattle’s economic recovery,” the Seattle Metropolitan Chamber of Commerce filed a lawsuit Tuesday against the Seattle City Council’s recently passed payroll tax.
The suit filed in King County Superior Court (see below) cites the need to “protect local businesses, particularly in the downtown core,” according to a news release from the Chamber.
“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.”
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The City Council in July approved the tax on the highest salaries at companies in the city with annual payroll expenses of $7 million or higher, generating an estimated $200 million yearly to fund relief for families negatively impacted by the COVID-19 pandemic and alleviate Seattle’s homelessness crisis.
It’s part of a longstanding effort in the city to increase funding for affordable housing and homeless services. The housing crunch has been exacerbated by regional economic boom of the last decade, largely fueled by the tech sector.
Matt McIlwain, managing director of Madrona Venture Group, told GeekWire during a podcast last week that the different tax policy attempts over the past few years were “unfortunate.” The Seattle venture capitalist noted that the policies drive technology companies out of the city.
“These sorts of things are discouraging people from placing their teams and operations in Seattle,” McIlwain said. “And I just know already from our portfolio companies that many of them have already let their leases expire and they have no intention of going back to that physical space. And think about the second- and third-order consequences of that for all of the small businesses around them.”
Amazon is placing thousands of jobs in nearby Bellevue, Wash., announcing in September that it planned to hire an additional 10,000 people in Washington state’s fifth biggest city. And just last week, cybersecurity giant Tanium moved its headquarters from the San Francisco Bay Area to Kirkland, Wash.
The Chamber, which represents 2,600 companies and a regional workforce of approximately 750,000, argues that the payroll tax will drive out the jobs that create the revenue the city is hoping to capitalize on and make Seattle less attractive relative to other cities in the region.
That fear is in line with action the Downtown Seattle Association took in August, when it asked the Seattle City Council to reconsider the tax following a report that Amazon had polled employees about which communities they’d prefer to work from elsewhere in the region.
The tech giant, which employs more than 50,000 people in and around its Seattle headquarters, has been at odds with the Council for years over its impact on the community. Just two months after the payroll tax passed, Amazon expanded on its plans to put thousands of its workers in Bellevue.
The Metropolitan Chamber said Tuesday that 210 stores and businesses have permanently closed in Seattle since the start of the pandemic, and lost jobs and remote work policies have left the downtown core “reeling from the economic shock.”
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.
Read the full complaint:
