Seattle work group proposes nine potential taxes to stabilize city’s revenue gap
(The Center Square) – The Seattle Revenue Stabilization Work Group has released a report proposing more taxes to address a $221 million budget deficit facing the city.
The work group offered nine new tax ideas, but noted in the report that “there is likely no single action that could be taken to fill the projected general fund gap.”
Instead, the work group expects multiple strategies will be needed to provide a pathway toward a sustainable government, while also addressing the projected 2025-2026 general fund shortfall. According to the city, expenses are currently projected to grow by $547 million from 2022 to 2026, outpacing increases in revenue and leading to a projected $221 million budget deficit in 2025.
The proposed strategies from the Revenue Stabilization Work Group include: changes to the city’s JumpStart Payroll Tax, implementing a surcharge to the existing JumpStart tax for high-earning CEOs, creating a city-level capital gains tax, a vacant residential and/or commercial unit tax, a progressive real estate excise tax, an estate tax, an inheritance tax, a congestion tax and a flat 1% income tax.
The city could increase JumpStart revenues, the report says, by increasing the tax rates for those who already pay the tax, increasing the number of businesses required to pay the tax, or increasing the number of employees for whom businesses must pay the tax. The Center Square reached out to Amazon and Google, which would be subject to this payroll tax, on whether an increase to the tax would affect operations within the city, but did not receive a reply.
Were Seattle to enact an inheritance tax, it would become the first city in the U.S. to impose one. The workgroup considered modeling the city-level tax on state inheritance taxes.
The Seattle Revenue Stabilization Work Group stated in the report that it was not asked to evaluate spending reductions – neither how much to cut, nor for what purposes.
“The workgroup understands that more than half of the general fund expenditures are related to staffing, and cuts to general fund expenditures could entail both undesirable impacts to city employees and reductions in city services,” the report noted.
From 2017 to 2023, general fund expenditures grew at an average rate of 5.5% annually, which was largely driven by increases to the city’s labor base and program expenses such as homelessness efforts. The 5.5% growth in expenditures was faster than the 4.3% annual inflation during the same period. Seattle’s general fund revenues grew at approximately 3.7% annually from 2017 through the 2023 adopted budget.
The Seattle Metropolitan Chamber of Commerce put out a statement following the report, calling out the city for spending more than it was taking in, even after passing the city’s largest tax increase in its history a few years ago.
The chamber cited a study by ECONorthwest revealing that the Seattle City Council has voted to impose new taxes totaling more than $700 million annually since 2018.
“A lack of budget transparency, accountability and practical problem-solving is why voters remain frustrated with the city’s response to its public safety crisis, lingering homelessness problem and trailing housing affordability as shown in the last several index reports,” Seattle Metropolitan Chamber of Commerce President Rachel Smith said in a statement. “Despite years of record revenues and spending growth – there is little measurable progress and few signs of concrete plans.”
Smith added that city leaders need to show they get results before there can be any discussions on new revenue sources.
In October, the city assembled a work group, consisting of 14 community leaders and policy experts, to address a then-$140 million revenue gap.
