Most of Seattle utilities panel favors replacing water tax with capital gains tax
(The Center Square) – The Seattle Public Utilities Customer Review Panel penned a letter to the city council in favor of replacing the utility tax on water with a new city capital gains tax, but not all panel members agree with that course of action.
In June, Seattle City Councilmember Alex Pedersen proposed a 2% capital gains excise tax on large, non-retirement financial gains to match the recently enacted Washington state 7% capital gains tax on the sale of stocks, bonds and other assets of more than $250,000. The proposed Seattle tax would apply to those who make more than $250,000 in a single year from the sale of assets, such as stocks or bonds.
The panel stated that they “strongly support” replacing the 15.5% utility tax on the sale of water with the capital gains tax, adding that the city’s utility taxes are a regressive form of taxation and disproportionately affect lower income households, as they pay a greater share of their income for essential utility services.
“Potable water is essential to the health and well-being of everyone and is a basic necessity; it should not be taxed,” the Seattle Public Utilities Customer Review Panel wrote in a letter obtained by The Center Square. “A majority of the panel [9 of the 11 members] is, therefore, supportive of enacting a local capital gains tax on investments in the same fashion as the recently enacted state legislation is utilized in lieu of the utility tax on drinking water.”
Fremont Dock Company President Suzanne Burke serves on the panel as a citizen. She was one of the two panel members who did not sign the letter due to her disagreement on replacing the water tax with a capital gains tax.
Queen Anne resident Bobby Coleman, director of asset management at the Seattle Housing Authority, is the other panel member who did not sign the letter.
Burke told The Center Square she is in support of ridding the water utility tax because “it shouldn’t be there.” However, Burked added that the replacing capital gains tax would only help the general fund in light of the city’s $221 million budget deficit, rather than being used for utility improvements.
The local capital gains tax is expected to generate approximately $50 million annually, if passed. It is expected to offset the general fund taken from Seattleites’ water bills each year, making the tax reform “essentially revenue-neutral.”
“If you think that they’re going to just put enough on so that they match [the revenue] they were getting on water, I think I have a bridge to sell you,” Burke said to The Center Square in a phone call. “They will [utilize the capital gains tax] as much as they can get away with.”
Burke said she likes Pedersen and agrees with the city councilmember’s stance on the utility tax being removed, but disagrees with the capital gains tax as a replacement because it could soon force out the wealthy people the tax is targeting, causing a potential further loss of revenue.
According to the Institute on Taxation and Economic Policy, Washington has the most regressive taxes in the country. Pedersen estimates that if the water tax is eliminated, it would save a median household in Seattle at least $100 per year.
The proposed capital gains tax will need to be adopted by the end of the year in order for it to remove the water tax and add the 2% tax in 2025.
