Proposals to Close City Deficit Prompt Immediate Backlash from Businesses, Business-Backed Council Members

A look at the ongoing structural shortfall in the city budget through 2026; “PET” refers to the JumpStart payroll tax.

By Erica C. Barnett

A list of potential progressive revenue options put forward by a city task force this week is already stirring controversy among businesses (and business-backed city council members) because it involves new taxes, rather than spending cuts, to maintain existing services and meet the city’s labor obligations. The policies, which are not recommendations, would help offset an average projected revenue shortfall, beginning in 2025, of $244 million a year.

Immediately after the task force published its list of options, one of the group’s own members, Seattle Metro Chamber CEO Rachel Smith, issued a statement denouncing the city for its “lack of budget transparency, accountability, and practical problem-solving” and arguing that the city’s real problem is overspending, not a lack of revenue.

Instead of proposing any new taxes, Smith said, Seattle should “look at reducing or eliminating services that do not meet measurable outcomes, are duplicative of other entities, are no longer aligned with current priorities, or have grown faster than real-world demands.” Smith did not identify any specific programs the Chamber believes the city should eliminate.

During a presentation of the recommendations to the council’s finance committee Thursday morning, Councilmember Alex Pedersen echoed Smith’s comments. “I believe City Hall doesn’t have a revenue problem. It has a spending problem,” he said. Chiming in, Councilmember Sara Nelson added that she believes the city should “live within our means” and cut the budget instead of raising taxes.

“I am simply suggesting that spending within our means is not austerity. It’s our responsibility,” Nelson said.


“The definition of austerity is a situation in which people’s living standards are reduced because of economic conditions,” Herbold responded.  

The projected shortfall, which is the result of declining revenues, expiring short-term funding, and spending increases, represents more than 15 percent of the city’s annual discretionary budget.

The progressive revenue work group, which included representatives from business and labor as well as the council and mayor’s office, came out of a statement of legislative intent the council passed in 2021, expressing the council’s commitment to work with the mayor to come up with permanent funding sources for a number of new general-fund programs that the city paid for using federal COVID relief dollars and revenues redirected from the JumpStart payroll tax.

With federal funding running out and JumpStart reverting to its intended purpose (funding housing, equitable development, and Green New Deal programs), the city is seeking new revenue sources to fund needs that are still ongoing, including homeless services, alternative 911 responders, and business assistance.

In addition to new programs, the city has had to spend more each year to keep up with population growth (more people require more services) and inflation, which raises labor costs. The city has also committed to raise wages for workers at human service nonprofits that contract with the city, which are so low that many employees qualify for public benefits. Overall, internal labor agreements account for 85 percent of the city’s increased costs through 2026, according to the work group’s report, while raises for human service workers account for about 4 percent of the increase.

According to a memo from the council’s central staff,  if the city fails to deal with this structural shortfall, the budget gap between 2025 and 2030 will average $244 million a year.

The task force, which looked only at the revenue side of the equation, whittled a list of more than 60 potential new fees and taxes down to nine, including three the city could implement right away, without the need for a ballot initiative or a change to state law. Those options include increases to the size or scope of the existing JumpStart payroll tax; a local tax on capital gains above a specific level, modeled after the state capital gains tax that recently withstood a state supreme court review; and a local tax on businesses whose CEOs make significantly more than the average worker.

Councilmembers have already proposed—and council staff have already analyzed—a JumpStart tax increase and a local capital gains tax, which could form the basis for future legislation and reduce the time it takes to pass either option.

In the council meeting Thursday, Nelson and Pedersen returned repeatedly to two ideas: First, they argued, the city should simply reduce the amount it spends on programs that, as Nelson put it, “do not meet measurable outcomes, are duplicative… [or] are no longer aligned with the city’s residents’ current priorities.”

“I am simply suggesting that spending within our means is not austerity. It’s our responsibility,” Nelson said.

Second, the pair argued, the city should get rid of all spending restrictions on the JumpStart tax, which provides a dedicated source of funding for housing and programs that benefit people and businesses disproportionately impacted by the presence in Seattle of large tech companies, like Amazon, and their wealthy employees. “I think the next city council could consider, once again, liberating those payroll tax revenues to handle that deficit, rather than locking up those dollars permanently for new programs [while] piling on another round of new taxes,” Pedersen said.

Councilmember Lisa Herbold—who, like Pedersen, is leaving the council next year—took issue with Nelson and Pedersen’s argument that budget cuts would not negatively impact the city. “The definition of austerity is a situation in which people’s living standards are reduced because of economic conditions,” Herbold said. “‘Just simply living within your means’ sounds nice, and it’s a great soundbite. I’m sure it’ll get picked up today. It sounds great. It’s just not accurate.”

The other taxes on the list include a tax on vacant residential or commercial units, which would have to navigate state law requiring uniform property taxes; a higher real-estate excise tax on the sale of properties above a certain value; a local graduated estate tax, with an exemption for the first $250,000; a local inheritance tax, paid by the beneficiaries of large bequests, which would be the first of its kind in the country; a congestion fee, or toll, on people who drive into highly congested parts of the city; and a flat income tax with rebates for low-income people.

All six of these options would require additional study, authorization from the state legislature, or a public vote, making them less viable solutions to the city’s near-term revenue shortfaull.

11 thoughts on “Proposals to Close City Deficit Prompt Immediate Backlash from Businesses, Business-Backed Council Members”

  1. Mayor Durkan pulled $100 million out of thin air to give to Black-led and Black-focused organizations following the George Floyd riots. No strings, no reports, no accountability whatsoever. Tammy Morales skirted spending rules by giving $3.3 million for the “Black Briliance Project” that also has not produced any verifiable outcomes.

    Former Mayor Ed Murray, who vowed to be “the most liberal mayor in the country”, and the Leftist City Council began creating new program after new program, which led to the City gaining a 40% increase in staffing for such things as a department to oversee private sector workers; a childcare program that only serves a few thousand kids and costs more per child than the Seattle School District spends per student; and a department to redistribute money collected from the soda pop tax, a tax on poor people, among other things. Each of those programs, and many, many others, deserve to be examined, measured, and potentially reduced or eliminated, along with many, many others. While Lisa Herbold might scream “austerity” if any of these were cut, we don’t have to waste money just because government is running the programs.

    1. Agree – childcare program has apparently not produced the expected results yet. Unnecessary projects should be stopped and their employees laid off.

  2. That’s not true. If you don’t have the energy to determine where to find that information (I haven’t found it difficult, and I’m definitely not an expert), sites like the very one you’re reading can tell you. Erica is an excellent source of information regarding what the City is and is not doing re homelessness services, and has pointed out many times in the past what other sources don’t, so continue reading her, and actually consider what is said.

    1. Sally Kinney is not a reliable source of information. Like Erica Barnett and most of the ideologues on city council, she has long supported and promoted the failed approaches that have led directly to Seattle’s homeless crises. Sally, Erica and friends insist that Seattle’s homeless problems are a result of high rents driven by Amazon, not untreated addiction and mental illness. They want to throw more money at failed approaches, with zero accountability. Don’t ask about outcomes – the privileged property/business owners should just shut their mouths and be happy to pay more. And when those measures don’t work, they’ll tell you that capitalism is to blame, and more money is needed to solve the problem. No amount of money will ever be enough when it’s just thrown at ineffective approaches,

    1. This comment is NOT agreeing with Sally Kinney. It appears the one I was agreeing with has been deleted. I do not agree with Sally Kinney!

      1. Of course it was deleted. Erica is a champion of free speech only if your opinions are in line with hers. Otherwise, you will be canceled, (screenshooting this since it will surely be deleted)

  3. For once, I’m with the business people, and the almost always sensible Peterson: No more taxes. We already have no idea where millions and millions of our dollars have gone, and the city is showing no interest in demanding and providing that evidence in exchange for the money, so no more taxes till they account for what they’ve already thrown away on things that obviously haven’t worked–they could start with councilmembers’ rich salaries.

    1. The City Councilmembers — including Nelson and Pedersen (not Peterson) — know where the tax dollars have gone, since they are the legislative body that levies those taxes. You would know also, if you read the proposed budgets which are always available to the public. It’s not terribly reasonable to charge that the City is wasting money on things that don’t matter, and yet complain that you don’t know where that money is going.

      1. Thanks for correcting me on correct spelling of Pedersen’s name. The councilmember, IMO, couldn’t tell me where 10 cents actually went. I don’t read proposed budgets because they are not the final budget for one thing, and we have constant shenanigans (to put it kindly) like that amazing $60K contract Marc Dones happened to get after he left the County’s employ. When I talk about wanting to know where the money’s going, I mean I want to see the bank statements. Except I’m not sure even they, or whatever passes for a check register these days, would tell me where the money went, either.
        I had reason to be talking with the State about where some money involving a family member went, and they said they couldn’t tell me because they don’t keep information on to whom money is paid. Have to admit, I was stunned. I put amount and payee in my check register and assumed, wrongly as it turned out, that the State would do the same or similar–something that if necessary it could show to account for monies it had paid out.
        So if you’re happy with proposed budgets, I’m glad you’re happy. They are meaningless to me except as aggravations. There is no proof that money is allocated accorning to them as far as I know.

      2. The City gave out money to something like 80 different nonprofits to deal with homelessness (A.K.A the Homeless Industrial Complex). Nobody has any idea what happened to much of that money.

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