AN ACT Relating to enacting an excise tax on large employers on the amount of payroll expenses above the social security wage threshold to fund public schools, health care, social services, and other programs and services to benefit Washingtonians;
SB 5796 would create a new state payroll expense excise tax on large employers in Washington. Beginning July 1, the tax would apply to the portion of an employer’s annual payroll expenses that exceeds the Social Security wage base, at a rate of 5 percent. The bill defines employer, employee, wages, and employment for purposes of the tax, and it directs the Department of Employment Security to administer the new chapter, collect the tax, and adopt rules as needed.
The bill also establishes a framework for reporting, remittance, penalties, interest, appeals, liens, collections, and enforcement. It prohibits employers from deducting the tax from employee wages, exempts employers whose total employee wages are at or below a specified threshold, and allows a credit for certain eligible city payroll expense taxes already paid. Revenue collected under the act would be deposited into the state general fund, and the bill states that the new revenue is intended to support public schools, health care, social services, and other public programs.
SB 5796 would add a new title to the Revised Code of Washington creating a state-level payroll expense tax on large employers. It would expand the Department of Employment Security’s responsibilities to include tax administration and enforcement, and it would create new statutory procedures for assessments, appeals, liens, collections, judicial review, and successor liability. The bill would also affect employers with payrolls above the Social Security wage threshold, while excluding smaller employers below the bill’s wage-based exemption and providing a limited credit for eligible city payroll taxes.
Based on the bill text, the measure is framed positively as a funding mechanism for essential public services, with repeated findings emphasizing support for schools, health care, behavioral health, social services, and vulnerable populations. The bill’s stated purpose is to preserve and expand public funding while making the tax system more progressive and less reliant on small and low-margin businesses. No committee transcripts or recorded votes were provided, so there is no additional evidence of support or opposition from hearings or floor action.
The principal policy tension in the bill is between revenue generation for public services and the burden placed on employers, especially large employers subject to the new tax. The findings explicitly acknowledge concerns about Washington’s tax structure being regressive and about the state’s reliance on business and occupation taxes, while also noting that the new payroll expense tax is intended to affect only a small share of businesses. Potential points of contention include the 5 percent rate, the use of payroll expenses above the Social Security wage threshold as the tax base, the administrative and enforcement powers granted to the department, and the interaction with local payroll taxes through the credit provision.