A newly proposed payroll tax would impose additional costs on large businesses operating in Washington state. However, Representative Shaun Scott, a Seattle Democrat sponsoring the legislation, contends it would safeguard basic services that help companies recruit and retain talent.
“People are looking to the state legislature for leadership on protecting the programs that make our state actually a healthy climate to do business in,” Scott said this week.
House Bill 2100, pre-filed this week in Olympia, would establish the “Well Washington Fund” and levy a 5 percent payroll expense tax on “large operating companies” for employee wages exceeding a $125,000 threshold. The bill defines a “large operating company” as one with more than 20 employees and more than $5 million in gross receipts or sales, among other criteria. Employers with total employee wages under $7 million in the prior year would be exempt.
Scott is positioning the bill as a state response to federal cuts affecting Medicaid, higher education, housing, and other programs. He said it would generate more than $2 billion annually and affect approximately 4,300 businesses, including Redmond-based tech giant Microsoft and telecommunications company T-Mobile, headquartered in Bellevue.
Seattle-based companies such as Amazon that already pay the city’s JumpStart payroll tax would be exempt from the state levy.
Scott said there is a “corollary effect” on corporations from policies that benefit “everyday people.”
“My sense of it is that the public is on our side on this issue,” he stated. “They understand that when you have very well-funded higher education, what that means is a well-trained workforce that could seek employment at a place like Microsoft or Amazon, and the company would benefit as a result.”
“When you have people who have very good housing options, that makes Washington that much more of a competitive place to come and do business,” he added.
Business groups express skepticism about the proposal. Rachel Smith, the new CEO of Washington Roundtable, characterized it as a “tax-first, plan later” idea. She also cited the state’s recent tax increases impacting businesses, passed partly to address a $16 billion budget shortfall, and broader economic uncertainty.
“If a job is cheaper somewhere else, and a company has an operational environment that allows them to deploy that job somewhere else, of course that’s going to be something they consider,” Smith said.
Lawmakers attempted to pass a similar statewide payroll tax this year, but the bill did not advance. In March, Microsoft President Brad Smith criticized that tax proposal, saying it would increase prices for consumers, reduce jobs, and harm the tech industry.
Microsoft declined to comment on the current proposal.
Representative Scott said it’s “disingenuous” that critics raise alarms about companies leaving when the state discusses funding the safety net, but don’t ask similar questions when companies cut jobs independently. He said the relocation question “does not come up when we see large tech firms investing in artificial intelligence, which is designed to divest from human labor.”
Washington is among a few states without personal or corporate income tax. Most state revenue derives from sales, property, and business and occupation taxes, a system critics say disproportionately burdens lower-income residents.
Gabriella Buono, interim president and CEO at the Seattle Metro Chamber, said that “raising taxes in an affordability crisis will mean higher prices on everyday essentials, fewer job opportunities, and more closures in sectors that are already on the edge.”
“Voters across the political spectrum are clear: they want smart spending, transparency, and results, not new taxes that make it harder to live and work in this state,” Buono said in a statement.
Revenue from the proposed bill would initially flow to the state general fund in 2026, then split beginning in 2027, with 51 percent directed to a dedicated Well Washington fund account and 49 percent to the general fund. A new oversight and accountability board would guide priorities and report annually. Spending from the account would be limited to higher education, healthcare, especially Medicaid, cash assistance, and energy and housing programs.
The 4,300 businesses affected represent a small fraction of Washington’s total business community but include many of the state’s largest employers. These companies generate substantial payroll expenses that would trigger significant tax liability under the proposed structure.
The $125,000 wage threshold targets high-earning employees common in technology, finance, and professional services sectors. This approach concentrates the tax burden on companies employing well-compensated workers rather than distributing it across all businesses.
The exemption for companies already paying Seattle’s JumpStart tax acknowledges existing local obligations and prevents double taxation. However, this creates geographic disparities where Seattle companies face different rules than those elsewhere in the state.
