Seattle is thinking about taxing big business in a bigger way.
The city this week released findings from a report detailing ideas for progressive taxes to help plug a budget gap that is expected to reach $221 million in 2025 and grow by another $207 million in 2026.
The report includes a shortlist of nine new or expanded taxes that the city may consider implementing.
One idea is to expand the controversial “JumpStart” tax that originally passed three years ago and targets payrolls at the city’s largest companies, including tech giants such as Amazon.
The city could, without voter approval or further state authorization, increase the tax rates for companies already paying the tax, the report said. It could also lower thresholds for payroll (increase the number of businesses required to pay the tax) or lower the total payroll threshold (increase the number of employees for whom businesses must pay the tax).
The report notes that about 80% of the JumpStart revenue comes from fewer than a dozen businesses, mostly in the tech sector.
The workgroup that compiled the report cautioned that expanding JumpStart “could influence decisions by large employers about whether to locate or expand their business operations within the City or to locate in nearby municipalities.”
The JumpStart tax currently applies to salaries over $174,000 annually at companies with yearly payroll expenses of $8.1 million or higher. It is generating about $250 million annually, according to the report.
The main goal of the tax has been to address Seattle’s housing and homelessness crisis, though the revenue also helped the city recover from economic distress during the pandemic. When the tax brought in more revenue than expected in its first year, the Seattle City Council approved a plan to use the extra money to plug shortfalls in its General Fund for the next two years.
Earlier this year, leaders from the Chamber of Commerce and Downtown Seattle Association sent a letter to Mayor Bruce Harrell recommending that the JumpStart tax be suspended to help increase competitiveness and attract new companies.
The JumpStart policy evolved out of a years-long battle over how the city should tax employers such as Amazon, which launched in Seattle more than two decades ago and has become the city’s largest employer.
“The City Council has become less enamored with business or with Amazon,” Amazon CEO Andy Jassy said at the GeekWire Summit in 2021. “It’s just been rougher.”
Other ideas highlighted in the report include a city-level 1% capital gains tax that could generate $25-to-$30 million annually, modeled after the new state capital gains tax that was recently ruled constitutional.
Another idea is a “High CEO Pay Ratio Tax” that would target businesses that have a high ratio of CEO pay to median worker compensation. San Francisco and Portland have similar taxes in place.
The city’s revenues have grown since 2017 but the pandemic caused revenues to decline “precipitously,” according to the report.
“In recent years, the City expanded the number of departments to address emerging needs of a growing population, and it undertook considerable new spending in efforts to address the homelessness crisis,” the report said. “New revenue sources created over the last several years have been passed for specific and important uses rather than for broader General Fund needs.”
Rachel Smith, CEO of the Seattle Metropolitan Chamber of Commerce, was part of the workgroup.
“City leaders should be doing everything in their power, every day, to generate and encourage economic activity — especially downtown as it continues to recover from the pandemic,” she said in a statement. “City leaders need to show they get results before there is any discussion of new revenue.”
The report, which you can read in full below, was compiled by a “Revenue Stabilization Workgroup” chaired by Seattle councilmember Teresa Mosqueda, who helped craft the JumpStart tax, and deputy mayor Tiffany Washington. The group included Smith and other leaders from various sectors including business, nonprofits, and real estate.
The city council’s housing and finance committee will discuss the report findings in a meeting Thursday at 9:30 a.m. — you can stream it here.
Seattle considers expanding 'JumpStart' tax on big businesses to plug budget deficit by GeekWire on Scribd
