When Joe Nguyen was sent to Olympia in 2019, representing West Seattle, White Center, and Vashon Island, the 35-year-old was celebrated by The Stranger as “an AOC of the Washington Senate” — an outspoken progressive in the mold of U.S. Rep. Alexandria Ocasio-Cortez. Nguyen had been a Democratic delegate for Rep. Bernie Sanders, who supported social benefits. In Olympia, to the delight of the Seattle Weekly, he was known for “yelling NO really loudly at Republicans.”
Nguyen, now 42, is still a progressive. But in his new post as president and CEO of the Seattle Metropolitan Chamber of Commerce, he’s joined the chorus of business groups yelling “No” at a statewide tax proposed by Democratic progressives. On the side of No he is joined by another former state senator, Joe Fain, the former floor leader for the Republicans. Fain is president of the Bellevue Chamber of Commerce.
Different political tribes, similar interests: both men head chambers of commerce that object to additional taxes on the employment of highly paid workers at a time of economic risk.
The proposed tax, embodied in House Bill 2100, is aimed at companies with highly paid employees. Faced with a new tax on the employment of the people most valuable to the business, some companies will let go of some of them. Some will stop recruiting new ones. Some will move part of their business, or all of it, to a friendlier place. Some will just pay — but they will be left with less money to do other things.
The proposed tax would take from employers an amount equal to 5 percent of what they pay employees above $200,000 for a single worker, $250,000 for married filing jointly, and $125,000 for married filing singly. The tax is on the employer, but indirectly it affects the employee. It makes the employee more costly to hire, without putting money in his pocket. Instead, the money goes into the government’s pocket.
State legislators are following Seattle’s “Jump Start” tax, imposed in 2021. That one charges most companies 0.746 percent, and a few billion-dollar companies 2.557 percent, of what they pay to employees above $192,450 a year. Seattle has thousands of people who earn more than that. In 2024 the Jump Start tax raised $440 million, and city officials were glad to have it.
Seattle’s tax hits only those companies with more than $9 million in payroll. Seattle Chamber President Joe Nguyen says about 500 companies have to pay, and that fewer than 10 companies pay most of it. At the top of the list is Amazon, the city’s, and the state’s, largest private employer. (Boeing was, but not anymore.)
Amazon has responded to the new payroll tax by moving several thousand employees from Seattle to Bellevue. It has more than 14,000 employees there, and has been aiming for 25,000 (though it just announced a large layoff). Amazon recently restarted work on its high-rise project in downtown Bellevue.
In the five years of Seattle’s Jump Start tax, Bellevue has added nearly 3.9 million square feet of office space. That’s 50 percent more than downtown Seattle did. Business is slowing in both cities now, and much of Bellevue’s office space is vacant — 23.5 percent, in the Cushman & Wakefield report for last year’s third quarter. That’s not a healthy figure, but it’s less pallid than the rate of office vacancy in downtown Seattle: 35.6 percent, which about the highest vacancy rate of any large city in the United States.
Jobs are also affected. When the Jump Start tax was imposed the growth in the number of jobs fell from 3 percent a year to one-tenth of 1 percent. Last year it was minus six-tenths of a percent. The Jump Start tax is not the only reason for that, but it’s one of them.
“Bellevue’s unofficial economic development strategy is basically, ‘We’re not Seattle,’ ” says Nguyen.
At the Bellevue Chamber, CEO Joe Fain allows that Seattle’s Jump Start tax “has given a short-term boost to Bellevue’s economy.” He knows it’s not a sustainable plan. “Bellevue needs Seattle’s success,” Fain says.
And now comes HB 2100, which proposes to take the tax rate Seattle imposes on billion-dollar companies, double it to 5 percent, and impose it on companies with a payroll of just $7 million. That’s the legislators’ idea of a “large employer.” Nguyen, who was the director of the state Department of Commerce last year, chuckles at this. “Those are not big companies,” he says.
Seattle’s tax exempts several types of employers — companies that sell insurance, groceries, liquor and motor fuel; also non-profits that do medical research. Non-profit hospitals and clinics that mostly do Medicaid work get an exemption for salaries below $400,000. The proposed state tax has no similar list of exceptions, though that could change.
The state bill would allow Seattle to keep collecting its Jump Start tax. Seattle companies could subtract their payments to the city from what they owe the state. No other city would be allowed to do this — only Seattle.
It is perhaps more than a coincidence that of the bill’s 19 co-sponsors — all Democrats — nine are from Seattle and five more represent Seattle suburbs. (Of the rest, two are from Olympia and one each from South Tacoma, Everett, and Spokane.)
The carve-out is a nice deal for the state’s biggest city. “I live in Seattle,” says Joe Nguyen of the Seattle Chamber. “I don’t want double taxation. But I don’t know how the rest of the state is going to feel subsidizing Seattle.”
They won’t like it.
The more important issue, Fain and Nguyen both say, is the effect of the proposed tax on the health of the state. “Washington’s economy is in a really tough place,” says Fain. Growth has slowed. In the past five years, the strong migration to Washington from other states has reversed. “The entrepreneurial class is leaving,” Fain says. Apart from health services, private-sector job growth has been flat — and now comes a wave of layoffs in the tech companies. There is talk of a recession. Maybe we are in one.
“At a time when we’re struggling, don’t make it worse,” Nguyen says.
The state is struggling, too. State tax collections on home sales, retail sales, and capital gains have been coming in slower than expected. Spending has continued to rise, opening a gap of $2.3 billion through mid-2027 in a budget of $79 billion. That’s a real problem, but not exactly a disaster. Nguyen, who was a budget guy in the State Senate, says the deficit is small enough to be closed partly by cuts.
If the Trump administration pulls away tens of billions in Medicaid and other funds, as the sponsors of HB 2100 fear, that’s a whole other matter. Washington’s generous social programs, which Nguyen supports, rely heavily on the 20-to-25 percent of the state’s budget that comes from the federal government. If that money really were to be cut off — and Nguyen is not predicting that — the budget gap would be many times larger than $2.3 billion.
What then? Ngyuen has no answer better than to wait for Trump to be gone. “There is no math that can help us overcome a gap that big,” he says.
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I’d like to try a new thing — instead of merely noping out on ideas one doesn’t like, make a proposal for a solution. As it stands, there is a $1B annual shortfall. Education is underfunded by $4B/year (especially special education), as are critical programs like food assistance and Medicaid. Are businesses really going to keep asking individuals to dig deeper into their pockets to pay for these when we already have a very regressive tax system? When regional businesses are making very good profits? Would cutting these services really help downtown, knowing that what you see on the street are downstream consequences of unfunding social services? And who is going to explain to these smaller towns that SEATTLE ALREADY SHOULDERS THE BURDEN OF HOMELESSNESS MORE THAN ANY OTHER IN THE STATE. King County accounts for 43% of all state revenue collected, while only using 27% of them. It’s totally reasonable to ask other stakeholders and regions of the state to pay their fair share. But I’m willing to entertain counter proposals, it’s time to find a better policy position than “no.”
The State has the unenviable record of “loosing track” of millions of dollars in grants and payments every year that can’t be accounted for. Going forward, every grant to any non-profit or NGO should have a prepaid mandatory annual audit. At State, County and City level, billions have been thrown at the homeless problem with few if any tangible results. We don’t have a budget problem, we have a spending and accountability problem.
We have a cliche problem
Tax the rich and solve our problems! A classic progressive siren song. Whether it’s taxing individuals earning > $1mm/yr directly at 10%, or imposing a 5% payroll tax, the impact is the same – people and companies will leave. And if for some reason you think a 5% payroll tax will only impact the highest earners, guess again.
For example, a company has a few $1mm+ earners, but 250 employees earning $100k per year. The company accrues an additional $500k annual tax liability via the payroll tax. They could offset this by suppressing (over time) compensation for their higher earners – or simply lay off one of them. BUT they could just as easily suppress/reduce earnings on their 250 employees earning $100k by 2% to offset the $500k liability. Or lay off 5 such employees. A fundamental economic reality is that employers don’t pay taxes, they collect them, and they’ll cover their additional tax obligations in ways our glorious state leaders can neither anticipate nor control.
We’ve already seen this movie up close and personal – via the payroll tax related migration of employees from Seattle to Bellevue. So, by all means double Seattle’s payroll tax and impose it at the state level! Employers can leave Washington State almost as easily as they left Seattle. If companies choose to stay, we can anticipate more wage suppression, layoffs, and out-of-state migration.
Initiating the proposed income and payroll taxes at a draconian level suggests irrationality and unpredictability amongst our state leaders. Hardly attractive traits for prospective employees/employers considering Washington as a destination. Particularly when progressive sanctimony rationalizes a tax structure that looks more like a vengeance tour than sound fiscal policy.
If you want a more mature fiscal policy, try an income tax that is implemented at MUCH lower levels (e.g. 2% on incomes > $200k per year) and maxes out at 5%. You’ll raise less revenue, but at least Washington will look more attractive than states like California and Oregon. On the spending side – by statute – limit annual growth rate in state budget to inflation + population growth. And live with it. If not, other states will welcome our former citizens with open arms.
“If not, other states will welcome our former citizens with open arms.”
Same old tired argument. Which states are those? 41 of the 50 states have income taxes. Where are they going to run to? Wyoming? Alaska? South Dakota? Tennessee (shudder)? Even Texas levies a “franchise tax” on corporations.
I say tax them. Good and hard. And yes, my legislators have heard from me.
Florida seems to be pretty popular lately for those fleeing high taxes…
I don’t have a crystal ball to view the state’s economy, but you don’t need it to see that Amazon is reducing its headcount already, where there isn’t any high earner tax to account for it. From Westneat’s article Saturday, Meta/Facebook laid off 331 and only 40 of them in Jump Start territory; only 15% of Amazon’s layoffs were in Washington state.
You also don’t need any special insight into these matters, to know what the CEOs and chamber of commerce people are going to say. You can skip right past that. If they can save $100 for a tech titan by writing up a screed for Bruce Ramsay to print, they’ll do it in a jiffy.
In the long run, Washington is likely to “benefit” from climate refuge status a lot more than a “bends over for big business” reputation. The legislature may have learned that lesson after they handed Boeing a tax break of historic proportion, only to see them pull up and move out.
What has made the state a destination is, to put it simply, it’s nice here. Climate refuge is a form of that, but also keeping infrastructure funded, including social infrastructure. There are other states that run the low budget game and don’t worry if things are kind of a shambles, and they do get business, but Washington isn’t that kind of state.