Washington State Floats New Payroll Tax Proposal: What Employers Need to Know
Washington State Floats New Payroll Tax Proposal: What Employers Need to Know
A new payroll-based tax proposal—modeled after Seattle’s JumpStart payroll tax—is expected to take center stage in Olympia this session. The measure, championed by Rep. Shaun Scott (D-Seattle), is positioned as a statewide effort to offset reductions in federal funding and bolster key public programs. But for Washington employers, particularly large companies with high-earning workforces, the bill signals another potential shift in an already complex tax landscape.
Overview of the Proposed Tax
Rep. Scott’s proposal, known as the Well Washington Fund, aims to tax large private employers with highly compensated employees. Key points include:
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A 5% payroll tax on compensation above $125,000 per employee
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Applicability to companies with:
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More than 50 employees
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Payroll exceeding $7 million
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Gross receipts above $5 million
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Estimated revenue: $5.5 billion per biennium
Supporters argue that the new fund would help stabilize vital state services, including housing, healthcare, education, and cash-assistance programs—areas they believe are threatened by federal funding cuts.
Support From State Leadership
Sen. Rebecca Saldaña (D-Seattle), who backed a similar measure in the previous session, says the bill is necessary to address structural budget gaps that persist even after the largest tax increase in state history earlier this year. Proponents emphasize that the proposal would create a more “balanced” tax system and ensure the state can sustain public programs that rely heavily on government funding.
Labor groups, including SEIU 775, have also signaled support, citing concerns over the potential loss of Medicaid-funded services for vulnerable populations.
Strong Opposition From Business Leaders and Republicans
Critics of the bill warn that it could accelerate the trend of Washington employers relocating operations to other states. House Republican Deputy Leader Chris Corry called the proposal “one more reason why businesses will think twice about staying here,” arguing that past payroll-tax policies have already pushed major employers to expand outside Seattle—most notably Amazon’s significant growth in Bellevue.
The Association of Washington Business echoed these concerns, stating that employers are already grappling with the highest cumulative tax burden in state history.
The central message from opponents: Washington cannot improve affordability by increasing costs for the businesses that fuel its economy.
Economic and Compliance Considerations for Employers
If enacted, the proposal would introduce a new layer of payroll-based taxation affecting compensation strategies, hiring plans, and long-term location decisions. Employers should begin assessing the following:
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Payroll impact modeling — Evaluate current salaries above the $125,000 threshold and estimate potential tax liabilities.
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Entity structure review — Determine how workforce aggregation, subsidiaries, or multi-state operations may change exposure.
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Compensation strategy evaluation — Consider whether bonuses, equity awards, or alternative pay structures may be affected.
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Scenario planning — Model the financial effect of the tax under various growth or workforce-expansion scenarios.
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Location and labor-market strategy — Consider how the proposal may influence competitive hiring in Washington versus other states.
Even if the bill does not advance this session, the continued introduction of payroll-based tax concepts signals an ongoing policy trend. Businesses should expect similar proposals to surface in future legislative cycles.
Broader Conversation: What Gets Funded?
Rep. Scott counters criticism by emphasizing that Washington’s largest expenditures—education, healthcare, and human services—are precisely the areas the proposal is designed to safeguard. He also points out that state assistance programs are heavily utilized in many Republican-represented counties, arguing that the bill would serve residents statewide, not just those in urban centers.
While this argument shapes the political narrative, it does not change the practical reality for employers:
Compliance burdens, administrative costs, and potential relocation pressures are all material business considerations.
What This Means for Your Business – Pivotal Forensic Accounting & Audits recommends that Washington employers—especially those with highly compensated staff—begin evaluating exposure and preparing for possible legislative movement.
Early analysis allows companies to:
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Avoid rushed or costly adjustments
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Communicate proactively with leadership and stakeholders
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Integrate new tax requirements into multi-year financial planning
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Strengthen compliance systems ahead of potential implementation
Whether the bill advances or stalls, its introduction underscores the importance of having robust financial models, tax forecasting tools, and strategic planning support in place.
Pivotal Forensic Accounting & Audits Can Help
Understanding emerging tax proposals is critical in today’s rapidly shifting regulatory environment. Our team monitors legislative developments, evaluates financial impacts, and guides clients through both planning and compliance.
If your organization needs help modeling potential payroll-tax exposure or preparing for upcoming policy changes, we are here to support you.
