HB 2100: Payroll Tax Changes Under Consideration in Washington State
House Bill 2100 recently received a public hearing in the Washington State House Finance Committee. The proposal, sponsored by Shaun Scott, would create a new payroll tax affecting certain medium and large employers operating in Washington. The bill has 18 Democratic co-sponsors and a companion measure in the Senate, SB 6093.
Under HB 2100, employers would pay a 5 percent payroll tax on the portion of employee wages exceeding $125,000 per year. The tax would generally apply to businesses with more than 20 employees, a threshold that could change as the bill moves through the legislative process. Eligibility would also be tied to revenue, applying to employers with more than $5 million in gross receipts or sales. Employers with total annual payroll of $7 million or less in the prior calendar year would be excluded.
The proposal introduces a compensation-based payroll tax structure that could influence how employers approach wage growth, hiring, and workforce planning. Payroll taxes tied to higher wages can create pressure for employers to cap compensation, restructure roles, or relocate certain positions outside the state. For businesses evaluating where to expand or establish operations, this type of tax adds another factor to long-term cost considerations.
HB 2100 closely resembles Seattle’s JumpStart Payroll Tax, which took effect in 2021. Since its implementation, Seattle has experienced a decline in business activity, including business relocations and fewer new companies launching within city limits. These outcomes are often cited in discussions about the broader economic effects of payroll-based taxes at the local level.
Supporters of HB 2100 argue that the tax would provide funding for public programs and reduce reliance on other revenue sources, including proposals for a statewide income tax. The bill establishes a new account called the “Well Washington Fund,” which is intended to support areas such as higher education, health care programs including Medicaid, cash assistance, energy initiatives, and housing programs.
However, the flow of funds outlined in the bill prioritizes the state’s general fund, particularly in the early years. Beginning July 1, 2026, all revenue generated by the tax would be deposited into the general fund. Starting in July 2027, 51 percent of revenue would be allocated to the Well Washington Fund, while the remaining 49 percent, along with interest and penalties, would continue to be directed to the general fund.
As written, the bill allows for broad use of funds rather than restricting revenue to narrowly defined programs. This structure has raised questions about whether the tax is primarily designed to support specific social initiatives or to address overall state budget pressures.
HB 2100 remains under consideration and could undergo revisions as it moves through the legislative process. Employers operating in Washington should monitor the bill closely and assess how a payroll tax tied to higher wages could affect compensation strategies, hiring decisions, and long-term planning if enacted.
