Today the Court of Appeals upheld Seattle’s payroll expense tax. According to the opinion, the tax “applies to the privilege of engaging in business, not an employee’s right to earn a living by working for wages.” Thus, “it is a valid exercise of the City’s taxing authority.”

Seattle collected $248.1 million from the payroll expense tax in 2021 (its first year), and the city estimates it will collect $277.5 million in 2022. It is the fourth-largest tax source for the city.

The chart shows general fund revenues from the city’s major tax sources over time. (For 2022, 2023, and 2024, the numbers are from the city’s April 2022 revenue forecast. In 2021, payroll expense tax revenues went to the general fund, but they will go to a separate fund beginning this year.)