A House proposal currently under negotiation authorizes counties with a population of at least 2 million to impose an annual payroll expense tax on employers engaging in business within the county, to be used for addressing affordable housing and homelessness.
Under the initial draft of HB 2907, sponsored by Rep. Nicole Macri (D–Seattle), the payroll tax must be at least 0.1%, but no more than 0.2%. Although the tax rate must be the same for all businesses, the county can impose a graduated rate that increases based on employee compensation. The tax applies to salaries of $150,000 or more. Businesses with fewer than 50 employees are generally exempt from this tax, as are federal, state, and local governments. The employer is responsible for paying the tax and may not make any deductions from employee’s compensation to pay for the tax.
The proposed bill was developed with input from some of the largest businesses (Amazon, Expedia, Starbucks, and Microsoft, among others) as a way they could agree to pay higher taxes to address the housing and homelessness crisis.
For many cities in King County, the bill came as a surprise and has raised concerns about the impact on their local businesses, preemption of their taxing authority, and how they will have a voice and input about how the money is spent.
While the bill passed out of the House Finance Committee in time to survive the fiscal committee cutoff, legislators indicated that the bill was a work in progress, with many details to be worked out by stakeholders. Those stakeholders have been working to hash out a compromise on most of the significant aspects of the bill, including how the money will be distributed and whether or not cities business taxing authority will be preempted. Cities, including AWC, are one of the stakeholder groups at the table, along with business, labor, and King County.
The bill is definitely still a work in progress as negotiators continue to explore whether a compromise can be reached.
HB 2907 needs to pass out of the House by the February 19 cutoff to continue to advance this session.