Rep. Shaun Scott, a Seattle Democrat, held a press conference Tuesday to announce a proposed statewide payroll excise tax on high-income earners. The justification is "Trump-proofing" the state budget against potential federal funding cuts. What this proposal really does is export Seattle's failed tax experiments across the entire state.
The proposed legislation ignores basic economic tenets: Capital investment is highly mobile – it goes where it's welcomed and leaves where it's punished. Further, without a strong private sector generating economic activity and revenue, the public sector cannot be sustained.
While Washington has an abundance of natural resources, we are not Alaska. We cannot rely on oil revenues to fund our state budget. The reality is that government spending is sustained entirely by the productivity of the private sector. Public programs do not generate wealth; they rely on the economic activity created by private businesses and their workers. If lawmakers incentivize those employers to leave, there is no financial backstop. When the private economy contracts, the resources available to the state vanish with it. Seattle has spent the past five years demonstrating what happens when you tax high-paying jobs. The city's "JumpStart" payroll tax, passed in 2020, was sold as an effort to make big companies like Amazon pay their fair share. It targeted high-wage employment, penalizing exactly the kind of jobs that build a strong tax base.
Amazon, the primary target of the JumpStart tax, paused Seattle construction and shifted over 14,000 employees to Bellevue, with plans to reach 25,000. The company didn't leave Washington, just Seattle. TikTok leased 450,000 square feet in Bellevue for its Pacific Northwest expansion. The Pokémon Company International signed one of the region's largest office leases in years in Bellevue. The concentration of these major investments in Bellevue proves, yet again, that capital moves where it is welcomed and away from where it is penalized.
Downtown Seattle's office vacancy rate sits around 35% as of late 2025, while Bellevue's market remains substantially tighter. This is the direct result of policy choices that made Seattle more expensive and less attractive for business.
Revenue generated by new taxes rarely remains in its promised, dedicated fund. Former Mayor Bruce Harrell has already diverted JumpStart funds into the general fund to cover basic operations, fueled by massive revenue losses in other areas. As Washington’s 2025 legislative session proved, when government gains access to new streams of tax dollars, its spending expands immediately to consume it.
Rather than learning from empty storefronts and departing businesses, Seattle voters approved another tax in February 2025. Proposition 1A adds a 5% tax on compensation over $1 million. The city is layering taxes on top of taxes, giving businesses more reasons to pack up and leave.
State lawmakers now want to apply this failing strategy across Washington through a statewide payroll tax on all jobs paying more than $125,000 per year, supposedly to buffer against potential federal funding changes.
The Puget Sound economy hasn't collapsed under Seattle's tax burden only because companies had an escape valve. They could move to Bellevue or Redmond and stay in the region. A statewide payroll tax eliminates that option. If employing a software engineer or biotech researcher costs more across the entire state, businesses won't move to another city in Washington. They'll move to Texas, Utah, or Tennessee.
Concerns about potential federal funding cuts don't justify raising taxes on Washington businesses. If federal money decreases, the appropriate response is fiscal discipline. Trim the state budget, eliminate inefficient programs, and focus resources on core services. Trying to offset federal cuts by taxing local job creators creates an economic spiral. Seattle has shown how this story ends: vacant office towers, a shrinking tax base, and budget problems that more taxation can't solve. State lawmakers should reject this tax and ensure the rest of Washington does not follow Seattle into fiscal failure.
