The Sonics left Seattle for Oklahoma City in 2008. In July of that year, the team's owners agreed to pay the city $45 million to end the KeyArena lease, with a possible additional $30 million in 2013 if certain conditions were met.
Eighteen years later, the arena problem is solved. KeyArena was rebuilt, privately, as Climate Pledge Arena, which opened in October 2021 at a cost of $1.15 billion. In March 2026, the NBA Board of Governors voted to formally explore expansion to Las Vegas and Seattle.
Then, last week, ESPN reported that Commissioner Adam Silver left owners at the September board meeting with the impression that Seattle was "no longer a lock." According to the report, the league is unhappy with the Seattle bids so far and has floated Mexico City as an alternative. The league's stated goal is still a decision by the end of 2026.
The reported issue is price. ESPN's sources said the Seattle offers are substantially lower than what the bidding for Las Vegas is producing. Nobody has reported that the league cited Seattle's taxes.
But taxes are part of what any owner pays to operate here. Seattle now has two city taxes measured by employee pay, and Washington has a new state income tax scheduled for 2028. So it is fair to ask what those taxes would cost a Seattle NBA team, and how a team would respond.
Under the illustration below, a team practicing in Seattle would pay about $6.5 million a year in city payroll taxes on player compensation. A team practicing outside Seattle and entering the city mainly for home games would pay about $2.2 million. That is a $4.3 million annual incentive to put the practice facility—and potentially other jobs—outside the city.
The Two City Taxes
Both city taxes are levied on the employer, not the employee. Neither can be withheld from a player's paycheck. SMC 5.38.030.C; SMC 5.37.040.C.
The JumpStart payroll expense tax (SMC 5.38). For 2026, a business owes the tax if it had $9,074,409 or more of Seattle payroll in 2025 and pays at least one employee $194,452 or more in 2026.
The rate depends on two things: the business's total Seattle payroll and each employee's annual compensation. For 2026:
| Employee annual compensation | Seattle payroll under $129,634,413 | $129,634,413 to under $1,296,344,132 | $1,296,344,132 or more |
|---|---|---|---|
| Under $194,452 | None | None | None |
| $194,452 to under $518,538 | 0.746% | 0.746% | 1.492% |
| $518,538 or more | 1.811% | 2.024% | 2.557% |
The rate applies to all of an employee's Seattle compensation once the employee crosses a threshold, not just the amount above it. Every NBA player clears the top threshold. The 2026-27 minimum salary for a player with no experience is $1,357,763.
This is not the "head tax." Seattle enacted a $275-per-employee head tax in May 2018 and repealed it a month later. JumpStart, enacted in 2020, is a tax on payroll.
The Social Housing tax (SMC 5.37). Seattle voters approved Proposition 1A on February 11, 2025. The tax took effect January 1, 2025. It is 5% of each employee's annual compensation above $1 million, to the extent that compensation is paid in Seattle.
There is no employer size threshold. The $1 million figure is not indexed for inflation. For an NBA team, nearly every player's pay is mostly above $1 million.
How Seattle Sources Player Pay
Both taxes reach only compensation "paid in Seattle." The Social Housing tax borrows JumpStart's sourcing rules. SMC 5.37.030. Each year, the employer picks one of two methods and applies it to all employees. SMC 5.38.025.
Under the hours method, an employee who works partly in and partly outside Seattle counts only in proportion to hours worked in Seattle. SMC 5.38.025.B.2. Road games are outside Seattle. So is a practice facility in Renton or Everett.
Under the primarily assigned method, compensation is all-or-nothing. It is paid in Seattle if the employee performs more than 50% of their duties at the employer's Seattle business location. If the employee is not primarily assigned anywhere, the next question is whether 50% or more of their service is in Seattle; if not, the answer turns on whether the employee lives in Seattle. SMC 5.38.025.C; Director's Rule 5-980.
The employer picks whichever method produces the lower bill. That is the point. A team that practices, trains, and keeps its front office in Seattle has a large Seattle payroll. A team that practices outside the city and comes into Seattle mainly to play home games has a much smaller one.
An Illustration
The following is an illustration, not a prediction. I am assuming:
- A player payroll of $170 million, between the 2026-27 salary cap ($164.961 million) and tax line ($200.428 million). Fifteen players: one at $50 million, one at $35 million, one at $25 million, two at $15 million, two at $6 million, three at $3 million, and five at $1.8 million.
- 2026 city rates and thresholds, applied to a full year.
- 200 duty days, with equal hours on each day.
- Player pay only. Coaches, executives, and staff are left out, though their Seattle pay counts toward the JumpStart rate tier and many of them would also be taxed.
- The team is past its first year. JumpStart applies only if prior-year Seattle payroll met the threshold.
- No state income tax. That is discussed separately below.
Case A: All player work treated as in Seattle. This is roughly the result under the primarily assigned method for a team that both practices and plays in Seattle.
- JumpStart: Seattle payroll of $170,000,000 is above $129,634,413, so the rate is 2.024%. $170,000,000 × 2.024% = $3,440,800.
- Social Housing: Excess over $1 million per player totals $170,000,000 − (15 × $1,000,000) = $155,000,000. $155,000,000 × 5% = $7,750,000.
- Total: $11,190,800 a year, about 6.6% of player payroll.
Case B: Practice in Seattle, hours method. I assume 120 of 200 duty days in Seattle (home games plus home practices), or 60%.
- JumpStart: $170,000,000 × 60% = $102,000,000 of Seattle payroll. That is under $129,634,413, so the rate is 1.811%. $102,000,000 × 1.811% = $1,847,220. Adding about $28 million or more of Seattle staff payroll would push the team into the 2.024% tier.
- Social Housing: $155,000,000 × 60% = $93,000,000. $93,000,000 × 5% = $4,650,000.
- Total: $6,497,220 a year, about 3.8% of player payroll.
Case C: Practice outside Seattle, hours method, Seattle days are home-game days only. I assume 41 of 200 duty days in Seattle, or 20.5%.
- JumpStart: $170,000,000 × 20.5% = $34,850,000. Rate 1.811%. $34,850,000 × 1.811% = $631,134 (rounded).
- Social Housing: $155,000,000 × 20.5% = $31,775,000. $31,775,000 × 5% = $1,588,750.
- Total: $2,219,884 a year, about 1.3% of player payroll.
Case A illustrates the primarily assigned method. Case B illustrates the lower bill the same team could get under the hours method on these assumptions. Because the employer chooses the method, the more useful comparison is Case B versus Case C.
Comparing the two hours-method illustrations, moving practice outside Seattle reduces the annual city tax bill on player pay by about $4.3 million. Actual savings would depend on salaries, documented Seattle working hours, staff payroll, and the sourcing method the team selects.
Three caveats. First, I applied the Social Housing tax's $1 million threshold to each player's total pay and then apportioned the excess, which is how I read SMC 5.37.030. If the city applied the threshold only after apportionment, Cases B and C would be lower. Second, hours are not days. Game days may be longer than practice days, and the city presumes 1,920 hours a year unless the employer documents more. Third, under the primarily assigned method, a team whose players spend more than half their working time at a practice facility outside Seattle could argue that little or none of their pay is paid in Seattle. Whether that works depends on actual schedules and where players live.
What This Does and Does Not Show
These taxes are not small. They do not make a team unaffordable. A franchise that the Washington State Standard reported could cost an ownership group upwards of $7 billion, backed by a lead group that reportedly includes Amazon CEO Andy Jassy and Melinda French Gates, can pay $11 million a year.
What the rules do is reward a particular choice. Under the hours method, moving work outside Seattle reduces the compensation allocated to the city. That gives a team a reason to put its practice facility, training staff, and business operations outside Seattle and come into the city to play. The arena cannot move. Almost everything else can.
There is local precedent for both choices. The Seahawks practice at the Virginia Mason Athletic Center in Renton. The Kraken practice at the Kraken Community Iceplex at Northgate, inside the city.
And a team with no Seattle location at all would owe neither tax. One competing proposal, reported by KOMO, would put an NBA arena on Tulalip Tribes land in Snohomish County. The city taxes play no role there.
The State Income Tax, If It Survives
Washington has never had a broad personal income tax. For decades, that was a recruiting edge for Washington teams.
ESSB 6346 imposes a 9.9% tax on Washington taxable income beginning January 1, 2028, after a $1 million standard deduction. If it survives, it is a tax on the player, not the team.
Practice location within Washington does not change the state tax. A Washington resident is taxed on all income, with a limited credit for income tax paid to other states. A nonresident team member earning more than $1 million is taxed on the share of pay matching Washington duty days to total duty days, whether those days are in Seattle, Renton, or Everett. RCW 82A.04.435. I walked through the duty-day rules here: Washington's Jock Tax Under ESSB 6346.
For a Washington resident player with $50 million of income and no other adjustments, the pre-credit math is ($50,000,000 − $1,000,000) × 9.9% = $4,851,000.
Governor Ferguson dismissed the concern in March: "Steph Curry's paid a lot of money in California. They have a pretty hefty income tax. So candidly, I just don't think that's got anything to do with anything." In February, the Ari Hoffman Show reported that a briefing prepared for the governor had listed the tax as a potential obstacle to recruiting players. That briefing also reportedly said a dedicated practice facility was a key issue for league officials.
Initiative 645 would repeal the tax and bar state and local governments from taxing individual income. Mailed ballots must be postmarked by November 3. Ballots returned to an official drop box must be deposited by 8 p.m. on November 3.
Bottom Line
The NBA's reported concern with Seattle is the size of the bids, not the tax code. But the tax code shapes what a Seattle team would look like.
Under the hours method, Seattle compensation is prorated by Seattle working hours. The primarily assigned method can instead source all of an employee’s compensation to Seattle. An NBA team would owe several million dollars a year in city payroll taxes if it practiced and operated in Seattle, and a fraction of that if it practiced elsewhere and came into the city mainly for home games. That creates a substantial financial incentive to put the practice facility and related operations outside Seattle. Whether a team does so will also depend on available facilities, operating costs, and ownership preferences.
The state income tax, if it survives, follows the player wherever in Washington he works. No facility decision avoids it.
If you are weighing where to locate employees in or around Seattle, schedule a 20-minute call.
Nothing in this article is legal or tax advice for your specific situation.
