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In early June, a King County judge struck down a lawsuit filed by the Seattle Chamber of Commerce, which had sought to overturn the city’s big business “JumpStart” tax. Now, the Chamber is taking its lawsuit to the Washington State Court of Appeals.

State lawmakers bring Seattle head tax battle to Olympia

The measure was originally passed by city councilmembers in July of 2020, levying a tax on corporations with payrolls over $7 million. Under the measure, qualifying businesses are taxed 0.7% for every employee making over $150,000, and 1.4% for employees making over $500,000.

The Chamber of Commerce alleged in its lawsuit that the tax violated the Washington state Constitution, and that it conflicted with the right of state residents to earn a living wage.

“We filed this legal challenge because the payroll tax is illegal — it does not align with Washington State Supreme Court precedent,” Chamber President and CEO Rachel Smith said in a news release.

In her ruling striking down the lawsuit in King County court in June, Judge Mary Roberts took issue with that reasoning, given that the JumpStart tax is levied directly on qualifying businesses, and does not actually affect individual employee salaries. She also noted that city governments have broad authority to tax business entities.

The JumpStart levy has already figured heavily into Seattle’s spending plans for the future, with its estimated funds widely incorporated into the city’s 2021 budget for COVID-19 relief and homeless response efforts. A proposed charter amendment from a coalition known as Compassion Seattle — and incidentally, — would also seek to redirect money from the tax to fund an expansion of homeless shelter spaces.

Taxing big businesses has also been a frequent source of conflict within City Hall. At the start of 2020, Councilmembers Kshama Sawant and Tammy Morales had initially proposed a more expansive 1.7% excise tax on just over 800 companies in Seattle, excluding nonprofits, small businesses, grocery stores, and government and educational employers.

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Months later, Seattle Councilmembers Lorena Gonzalez and Teresa Mosqueda blocked the measure, with Sawant stating that she was “completely stunned and scandalized” by the decision at the time. Mosqueda proposed her JumpStart business tax two months later, which the council would eventually pass with broad support (including from Sawant and Morales).

In mid-July of that same year, Mayor Jenny Durkan , claiming that it would “ultimately hurt Seattle’s ability to recover from the economic devastation caused by COVID-19.” With a veto-proof majority from city councilmembers, the bill went into effect after a designated waiting period despite the mayor’s objections.

The Chamber of Commerce eventually filed its lawsuit seeking to overturn the tax entirely in December of 2020. The litigation will now go before the state appeals court, which will review the King County Superior Court’s “application of the law.”