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Head tax, Big business tax
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Judge strikes down lawsuit that sought to overturn Seattle big business tax

(Matt Pitman, KIRO Radio)

A King County judge struck down a lawsuit filed by the Seattle Chamber of Commerce, which had sought to overturn Seattle’s big business “Jump Start” tax.

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The tax was passed 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.

In practice, the JumpStart tax is levied directly on qualifying businesses, and does not come out of employee salaries. That proved to be key to the judge’s ruling, who noted in her ruling that cities have broad authority to tax business entities.

Seattle city leaders praised the ruling shortly after it was issued.

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“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,” Councilmember Teresa Mosqueda said in a written release. “We now have the assurance that this progressive revenue stream is coming as we seek to respond to the crises worsened by COVID-19.”

There would have been wide-ranging implications had the tax been overturned in court, given that funds from the measure were widely incorporated into Seattle’s 2021 budget to account for COVID-19 relief money and homeless response efforts.

In the near term, it borrows from the city’s emergency and general funds, and then will pay that back with interest when the tax begins to collect money in 2022.

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