Seattle payroll tax revenue $47M short, complicating city’s budget challenge


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Revenue collected last year from Seattle’s payroll expense tax on big businesses was $47 million lower than projected, with Mayor Bruce Harrell implying that large corporations aren’t paying their fair share.

The Office of Economic and Revenue Forecasts released its year-end revenue report on Tuesday, revealing the less-than-expected intake. A forecast in October estimated the tax would generate $406.8 million. Instead, actual revenues totaled $360 million.

The JumpStart Payroll Tax was passed in 2020, and is often referred to as the "Amazon Tax," due to it targeting larger Seattle-based companies like Amazon, Meta, and Google. The tax's stated purpose was to pay for affordable housing and some environmental initiatives. It levies a 0.75% to 2.5% tax on about 500 of Seattle’s largest businesses – that is, those with at least $8.5 million in local annual payroll. Amazon, Meta and Google are expected to pay $520 million this year.

In a statement following the report, Harrell acknowledged that the drop in payroll tax revenue will significantly impact the city’s budget for future years. He blamed Seattle’s large businesses for shifting employees to offices outside of the city to avoid the tax.

“Large corporations should pay their fair share and we should be wary when they use job placements to avoid paying funding that our communities rely on, but we also must recognize businesses will make choices based on their bottom line,” Harrell said in a Tuesday statement. “We need to design our tax policies with the full context of our economy and a comprehensive view that ensures we raise the revenue needed to support all of our residents in a progressive way, aligned with our values.”

The Center Square previously reported that Amazon is moving more of its corporate employees to Bellevue, setting a goal of bringing 25,000 jobs to the city.

The payroll tax is being heavily used in the city’s 2025-2026 budget to address a $350 million general fund shortfall through 2026.

When the tech sector began to cool considerably in 2022, total payroll tax obligations declined about 13.6% year-over-year, from $293 million in 2022 to $253 million, which was 10% below the forecast from November 2022.

The tech sector recently saw layoffs in the Puget Sound region. For instance, earlier this year, Meta laid off about 3,600 employees, or 5% of the company’s workforce. 

Seattle City Councilmember Dan Strauss, who serves as Budget Committee chair, is optimistic that the recent return of workers to the downtown area full-time will help with the numbers.

Seattle’s largest companies are subject to another tax this year: a 5% tax on annual compensation above $1 million paid to any Seattle employee. The revenue generated goes toward the development of social housing in the city. The tax went into effect at the beginning of the year.