Payroll expense tax forecast in Seattle proves businesses respond to incentives

In response to the release of the latest city of Seattle revenue forecast, the Association of Washington Business, Bellevue Chamber, Seattle Metropolitan Chamber of Commerce, and Washington Roundtable issued this joint statement:

“While there is economic news coming in from every corner of the nation and world, policymakers in Washington state need to take note of what is happening right here at home. Seattle’s April Economic and Revenue Forecast and the city’s 2024 Year-End Revenue Report tell a cautionary tale; nearly all city of Seattle revenue sources indicate that business activity is down and falling:

• 2024 Payroll Expense Tax collections fell short of the October forecast and are projected to be 18.5% below budget in both 2025 and 2026;
• Business & Occupation Tax revenues dropped year-over-year in 2024 and projections were also adjusted downward for 2025 and 2026;
• And, due largely to reduced construction activity, Sales & Use tax collections were essentially flat year-over-year in 2024 and are also projected to fall short of expectations this biennium.

Or said another way: B&O and Payroll Expense Tax are down, Sales Tax is flat, and all three of these major revenue sources for the city are forecasted to come in under budget this year and next. While there is likely no single driver, it is unquestionable that the policy choices made related to taxes and regulation are big ones. As Seattle’s chief economist has said, “businesses respond to incentives” – and our city and state cannot afford to continue incentivizing decisions to push jobs and economic activity out of our cities, regions, or state.”