A new state legislative proposal modeled after Seattle’s payroll tax aims to generate more than $2 billion annually from large employers including Amazon and Microsoft, setting up what promises to be a contentious debate in Olympia.
State Representative Shaun Scott, a Seattle Democrat, plans to formally introduce the proposal Tuesday on the Capitol steps. In a preview interview, he characterized the legislation as a response to anticipated federal funding reductions resulting from the Trump administration’s spending policies.
“The Well Washington fund is about investing in critical silos of public sector spending at the same time that the Trump administration is defunding them,” Scott said on the eve of unveiling his proposal.
The legislation would impose a 5 percent tax on payroll expenses above $125,000 for workers at Washington’s largest private employers. Companies with more than 50 employees, payroll exceeding $7 million, and gross receipts above $5 million would be required to contribute to the fund.
Scott estimates the tax would raise $5.5 billion per biennium, or roughly $2.75 billion annually, representing a significant new revenue source for state programs.
The effort has backing from State Senator Rebecca Saldana, a Seattle Democrat who attempted to advance similar legislation that stalled in the House last session. Saldana credited Scott with reviving the issue, arguing the state continues facing budget shortfalls despite passing what she described as the largest tax increase in Washington history earlier this year.
Saldana positioned the tax as necessary to protect funding for housing, healthcare, and education programs. Her previous bill included carve-outs for Seattle businesses already paying payroll taxes under the Jumpstart Tax enacted in 2020.
House Republicans have signaled strong opposition to the proposal. Chris Corry, Deputy Leader of the House Republican Caucus, offered a blunt assessment: “It’s a bad idea. This is just one more reason why businesses will think twice about staying here and will definitely think twice before starting here.”
Corry challenged the premise that state tax increases should offset federal budget adjustments. “I find it extremely disingenuous that it’s okay for us to do it, but if the federal government says they want to size their budget right and maybe do stuff a little differently, that that is somehow not allowed,” he said.
The Republican legislator pointed to Seattle’s experience with the Jumpstart Tax as a cautionary tale. He argued the tax prompted companies like Amazon to seek office space elsewhere, undermining projected revenue while benefiting neighboring cities.
“Seattle has continued to face revenue deficits because the money that they were projecting from their Seattle Head Start tax didn’t materialize. The biggest beneficiary of all of this is the city of Bellevue, because that’s where all the jobs went,” Corry stated.
He urged Democrats to focus on reducing program spending rather than imposing new taxes that risk driving businesses from the state. “As nice a place as it is to live in this state, we are one of the most beautiful, gorgeous states in the world. Businesses will not stay here because of our pretty environment. They will move to greener pastures. It is easier now more than ever to get out of this state, and we’ve seen that from companies like Amazon, Fisher Investments, all sorts.”
SEIU 775, representing healthcare workers, plans to support Scott during Tuesday’s announcement. The union issued a statement connecting the proposal to potential federal Medicaid cuts, warning that “thousands of vulnerable seniors and people with disabilities could lose access to critical services like home care that help them live safely in their own homes and communities.”
The union statement continued, “The state needs to fix its upside-down tax system and ask the wealthy to pay their fair share to protect these critical services.”
The Association of Washington Business opposed the proposal through spokesperson Max Martin, who stated, “This proposal undermines the goals of maintaining a healthy economy by making the state less affordable and less competitive. Legislators just passed the largest tax increase in state history, and the No. 1 concern of Washington employers right now is the state’s overall tax burden. This will only add to it. We can’t make Washington more affordable by making it more expensive.”
Scott acknowledged awareness of business community concerns about companies relocating but questioned which state programs critics would prefer to cut.
“There are some people who I do think look at state spending and maybe have a few qualms about that. The question that I would ask them is, well, which areas would you prefer that we divest from? We spend most of our money in Washington State on public schools. Maybe you think our public schools have too much money. Maybe you think health care is too available. Maybe you’d like to see fewer people be able to access higher education,” he said.
Scott noted that the Well Washington Fund would bolster cash assistance programs, pointing out that Republican-represented districts show higher rates of reliance on supplemental nutrition assistance.
“The fact of the matter is that you see a much higher density of people who rely on supplemental nutrition assistance programs in Republican districts than you do in blue ones. In Mason County, Franklin County, Benton County, and other counties that are GOP-led in the State House of Representatives, you see people rates like one in seven, one in eight people depending on cash assistance programs like food stamps, so we’re fighting for them too,” Scott added.
The 60-day Washington State legislative session begins January 12, providing a compressed timeline for consideration of major policy proposals including this payroll tax legislation.
