Payroll tax discourages family-wage jobs

House Bill 2100 creates a new state payroll tax on employers by imposing a 5% excise tax on compensation paid above $125,000 per employee. Notably, the threshold applies to total compensation, not just base salary—meaning wages, bonuses, and benefits are all counted.

The tax applies to “large operating companies” and directly increases the cost of employing workers across a wide range of industries. Revenue would flow to the state general fund and a new “Well Washington” fund.  

Why is this a bad policy?

• Disincentivizes good-paying, family wage jobs. Taxes change behavior. By taxing compensation about $125,000, this bill discourages employers from creating or expanding good-paying, family-wage positions. At a time when Washington should be attracting and growing these jobs, this bill makes them more expensive to offer.
• Redefines “high-paying job” to include normal family wages. The bill is framed as targeting “high-paying jobs,” but the $125,000 threshold is based on total compensation—including benefits—and is increasingly capturing family-wage jobs across Washington’s economy. By treating these wages as excessive, the bill discourages employers from offering competitive pay and benefits that allow families to get ahead.
• Lays the groundwork for a statewide income tax. By imposing a state-level tax on wages and total compensation, the bill fundamentally changes Washington’s tax structure. While labeled a payroll tax on employers, it functions like an income tax—and once that precedent is set, expansion becomes far easier. Washington voters have repeatedly rejected an income tax, yet this approach moves the state closer to one.
• Doubles down on a tax-first budget strategy. Employers don’t absorb payroll tax. They pass the cost along. This tax would lead to higher prices, slower wage growth, reduced benefits, and fewer job opportunities, worsening Washington’s affordability crisis.
• Threatens jobs and long-term economic growth. By making it more expensive to employ workers, HB 2100 discourages companies from expanding or encourages them to move jobs out of state. This risk is grave given that the November revenue forecast projected zero job growth in 2026, meaning Washington can least afford policies that raise the cost of employment and stall economic momentum.

Bottom line
HB 2100 disincentivizes 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, discourages job growth, raises costs for families, and moves Washington closer to a statewide income tax—all without addressing the state’s underlying budget problems.