Washington Democrats are considering a new state payroll tax on employers. House Bill 2100 imposes a five percent excise tax on compensation paid above one hundred twenty-five thousand dollars per employee. Importantly, this threshold applies to total compensation, not just base salary. Wages, bonuses, and benefits are all included, which means many standard compensation packages could be affected.
A similar tax led to Amazon leaving Seattle for nearby Bellevue. Multiple Washington corporations warned the Washington State Legislature during the last legislative cycle that the reckless tax and spend policies could endanger business and cause jobs to leave the state.
Dozens of business leaders from across Washington state are urging the Legislature to reverse course on the Democrats’ reckless spending and tax proposals:
“… These proposals would result in the largest tax increases in state history, perpetuating a dangerous trend of… pic.twitter.com/lH8kElsErJ
— WA House Republicans (@WaHouseGOP) April 2, 2025
It was recently revealed that Washington is experiencing a net migration loss after the Democrats passed the largest tax increase in state history in 2025.
The tax would apply to large operating companies and would increase the cost of employing workers across a wide range of industries. Revenue from the tax would flow to the state general fund and a new “Well Washington” fund. While supporters frame the proposal as targeting high-paying jobs, the structure of the bill suggests it would reach much further into the workforce than advertised.
By taxing compensation above the threshold, the bill discourages employers from creating or expanding good-paying, family-wage jobs. Taxes change behavior, and when the cost of offering competitive compensation rises, employers are more likely to limit job growth, slow wage increases, or rethink where they invest. At a time when Washington should be working to attract and grow these jobs, the proposal makes them more expensive to provide.
The bill also effectively redefines what counts as a high-paying job. Because benefits are included in the compensation calculation, workers earning what most would consider normal family wages can be swept into the tax. Health insurance, retirement contributions, and other standard benefits can push total compensation past the threshold. Treating these wages as excessive discourages employers from offering the pay and benefits that allow families to get ahead.
Although labeled a payroll tax on employers, the proposal represents a significant shift in Washington’s tax structure. By taxing wages and total compensation at the state level, it functions much like an income tax in practice. Once that precedent is established, expanding it becomes far easier. This is especially concerning in a state where voters have repeatedly rejected a statewide income tax.
The bill also reflects a tax-first approach to budgeting that ignores how payroll taxes actually work. Employers do not absorb these costs in isolation. They are passed on through higher prices, slower wage growth, reduced benefits, and fewer job opportunities. For families already facing high costs of living, this would only worsen Washington’s affordability challenges.
Finally, by making it more expensive to employ workers, the bill threatens long-term economic growth. Companies may choose not to expand in Washington or may move jobs elsewhere. This risk is particularly serious given recent forecasts projecting no job growth in the near term. Washington can least afford policies that raise the cost of employment and stall economic momentum.
The bottom line is that House Bill 2100 discourages the creation of good-paying, family-wage jobs by taxing total compensation rather than just salary. It penalizes employers for offering competitive wages and benefits, raises costs that ultimately fall on families, and moves the state closer to a statewide income tax, all without addressing the underlying causes of the state’s budget problems, which are caused by overspending.
Read more at: Stop Bad Bills