Category: Taxes

City Council, Elections, human services, Taxes

Business Tax Plan Moves Forward, Larded With New Exemptions and Spending Categories

By Erica C. Barnett

The Seattle City Council moved a heavily amended proposal to raise business and occupation taxes on larger companies one step closer to the ballot on Wednesday, approving the measure in the budget committee while leaving open the possibility that it could be amended further next week, when it goes to a full council vote.

The proposal would exempt all gross business revenue up to $2 million from local B&O tax, raising taxes on the highest-grossing businesses to offset the small-business tax relief and pay for programs that might otherwise be cut due to a projected $241 million budget deficit.

The potential ballot measure, proposed by City Councilmember Alexis Mercedes Rinck and Mayor Bruce Harrell late last month, was originally supposed to raise about $90 million a year to fund programs that support food access, gender-based violence services, small business supports, emergency shelter, homelessness prevention, workers’ rights and protections, and housing stability.

Rinck has been calling the proposal the “Seattle Shield” bill, because it’s meant to shield Seattle from the worst impacts of federal cuts to critical, life-saving services.

Thanks to amendments piled on Wednesday afternoon by Rinck’s colleagues Maritza Rivera, Joy Hollingsworth, and Rob Saka (plus a potential future amendment from Dan Strauss), the proposal is on track to bring in about $11 million a year less than originally estimated. The council’s amendments also broadened the measure so it can fund programs far outside its original scope.

Introducing two amendments that will exempt Seattle Children’s Hospital and Fred Hutchinson Cancer Care from the tax, at an estimated annual revenue reduction (or cost) of more than $9 million, Rivera argued that funding for cancer treatment and pediatric care represented “the very problem this bill is claiming to address—that is, impacts to our residents, including our kids, based on federal cuts and policy changes attacking those who need these critical services.”

Rivera added that when Rinck and Harrell first proposed the tax, “it was not clear that that nonprofits pay B&O tax.” In Washington State and in Seattle, most nonprofits are taxed exactly the same as for-profits, except that some of their fundraising activities are tax exempt. “These are nonprofits, these are not businesses,” Rivera said of the two hospitals she singled out for exemptions.

Strauss plans to propose an additional tax exemption for stevedoring—companies that load and unload cargo from ships—on the grounds that maritime trade is critical to Seattle. That exemption, which Strauss said he’d introduce on Monday, would reduce the proceeds from the new tax by another $1.5 million a year. In all, the new exemptions could reduce annual revenues from the tax by almost $11 million, or around 12 percent.

The city doesn’t have precise revenue estimates because businesses—including hospitals structured as nonprofits—don’t have to report their revenues publicly.

After voting for the two exemptions, Rivera and Nelson blanched at the idea of increasing the size of the tax to make up for lost revenue, saying they hadn’t had a chance to thoroughly study the impact of such a rate increase. “It’s unfortunate that this was sort of—that this landed in our laps at the sort of the last minute,” Nelson said. “It just feels rushed to me. … It’s unfortunate that this didn’t come to us earlier in the year.”

Rinck countered that the only reason she brought up the idea of increasing the tax rate was the last-minute amendments from Rivera and Strauss; had they not introduced new tax exemptions in the last week, she wouldn’t have proposed increasing the tax to offset the losses their exemptions would cause.

“If we had known about any tax credits coming sooner than on Monday, I think we would have worked quickly to try and understand what an adjusted rate would look like,” Rinck said.

In addition to the exemptions, the council also adopted several amendments expanding how the new tax, if it passes, can be used. The changes will allow this council, and future councils, to spend the so-called Seattle Shield dollars not just on human services and homelessness programs but on “transportation projects” of all kinds, arts and culture programs, anything related to public health, business workforce development, storefront repairs, and substance use treatment, among other new spending categories.

Rinck, and others who opposed expanding the proposal so far beyond its original purpose, noted that the city already has dedicated funds that pay for arts (the admissions tax), workforce development (the Families, Education, Preschool, and Promise levy), and transportation (the recently renewed transportation levy, which is the biggest in the city’s history). Saka justified including transportation on the potential spending list because Trump has threatened to pull transportation funds from cities, like Seattle, that have low marriage and birth rates.

The impact of adding so many new spending categories to the legislation is unknown. Public commenters, including advocates for people at risk of going hungry in Seattle, expressed concern about spreading the “peanut butter” of limited funding too thin by using the tax proceeds as a slush fund for individual council members’ priorities.

The committee also approved an amendment from Councilmember Bob Kettle, who was absent, that will require the mayor’s office to come up with high-level balanced budget proposals for two years beyond the scope of the biennial budget. Last year, Harrell proposed a budget that was balanced through 2026 but fell out of balance in 2027, with a total projected deficit of $158 million between 2027 and 2028. Another Kettle amendment passed that would remove a sunset date of 2033 (with the possibility of a four-year extension) and lower the tax rate beginning that year.

The full council will take up the proposal next Monday, just before the August 5 primary election that marks the deadline to get it the measure on the November ballot. On Monday morning, the city’s Office of Economic and Revenue Forecasts will present its latest revenue projections, which will reveal whether this year’s budget deficit is smaller or larger than the $241 million shortfall projected in April.

City Council, Courts, Elections, Mayor Harrell, Renters, Taxes

This Week on PubliCola: July 27, 2025

Renters’ commission appointments thwarted, city attorney blasted in court for refusing to let judge hear cases, and much more news from this week.

By Erica C. Barnett

Monday, July 21

PubliCola Questions: Mayoral Candidate Joe Mallahan

In an interview with PubliCola, mayoral candidate Joe Mallahan, who narrowly lost to Mike McGinn in 2009, said he opposes encampment sweeps, supports an “intervention”-style approach to addiction, and would focus on “respect for women” in an effort to reform the misogynistic culture of the Seattle Police Department.

Tuesday, July 22

Council Broaches Using Housing Levy, Proposed “Seattle Shield” Tax Funds to Backfill General Fund Shortfall

Facing a likely budget deficit of $250 million or more, the Seattle City Council has started discussing new sources of money to backfill general fund spending and stave off major budget cuts. The latest ideas, which came up in a budget meeting this week, include borrowing funds from the housing levy (ultimately resulting in the construction of less housing) and preemptively allowing the proceeds from a future business and occupation tax increase to be spent on any purpose.

Wednesday, July 23

Municipal Court Judge Shadid Blasts City Attorney for Refusing to Send Cases to Judge Vaddadi

In an unusual confrontation in open court, Seattle Municipal Court Judge Damon Shadid excoriated the criminal division chief for City Attorney Ann Davison’s office, Fred Wist, for his office’s ongoing refusal to allow Judge Pooja Vaddadi to hear DUI and domestic violence cases. Davison filed a blanket affidavit of prejudice against Vaddadi in 2023, relegating the elected judge to reviewing traffic tickets.

Renters Commission Appointments Thwarted by Saka and Nelson’s Last-Minute Absence from Their Own Committee

For her entire 18-month term, former councilmember Cathy Moore refused to consider appointments to the city’s Renters Commission, and was working to replace the group with a joint landlord-tenant commission when she resigned. When the vice chair of her committee, Mark Solomon, moved to approve the appointments, two committee members, Sara Nelson and Rob Saka, bailed, depriving the committee of quorum and thwarting their appointments—again.

Friday, July 25

Afternoon Fizz: Harrell’s “Emergency Housing” Claims Don’t Stand Up to Scrutiny, Council Hopefuls Quizzed on Crime, Renters Commission Appointments Will Get a Vote After All

After a public outcry over the thwarted renters’ commission appointments, Council President Sara Nelson announced the full council will consider the nominations next Tuesday. Also, we took a look at Mayor Bruce Harrell’s campaign claim that he oversaw the creation of “3,000 units of emergency housing” and found it wanting. And: The six nominees for the District 5 city council appointment discussed crime and other issues at two public forums; the council will appoint a new colleague, likely former councilmember Debora Juarez, next week.

 

City Council, Elections, Taxes

Council Broaches Using Housing Levy, Proposed “Seattle Shield” Tax Funds to Backfill General Fund Shortfall

 

By Erica C. Barnett

During a recent discussion of a potential ballot measure that would increase the business and occupation tax for larger businesses and exempt gross revenues up to $2 million a year, Councilmember Maritza Rivera suggested that the city should not dedicate the new tax, if it passes, to housing and human services, but put the money in the general fund instead, where it could pay for anything from police to road repairs to prosecution.

The council sponsor of the proposal, Alexis Mercedes Rinck, has dubbed it the “Seattle Shield” proposal because, she says, it will help shield the city from some of the more devastating cuts from the Trump administration, by contributing about $90 million a year to critical safety-net services. Voters will “choose whether we protect each other or abandon each other,” Rinck said when announcing the plan.

But, Rivera noted, the city is also facing a budget deficit of $250 million or more (the next revenue forecast will come in August.) “At the end of the day, you know, it begs the question: Why not just put all of this in the general fund?” Rivera said. “And as you’re doing the budget process, then you’re delineating where it goes, because we keep doing these funding sources, and then we are narrowing what we can use to spend with it.”

The JumpStart payroll tax, for example, was originally passed to pay for services targeted toward people most impacted by the high cost of living for which big companies like Amazon are partly responsible; since its passage, however, the council has turned it into an all-purpose slush fund.

Rinck noted that the Trump cuts will likely include emergency housing vouchers, homelessness funding through the federal Continuum of Care, and funding for basic needs like food assistance. “The outlined areas in this legislation are intended to speak to where we are anticipating the cuts will be the deepest,” Rinck said. Additionally, she said, “I think we need to be clear with voters about what we intend to use these funds for.”

It’s hard to say whether voters would find the idea of a tax that can be used for any purpose the council chooses appealing, but Seattle’s other voter-approved levies and taxes are all for specific spending areas, so a business tax for the general fund would be a major departure from precedent.

Rivera also brought up another idea that has come up frequently in recent months, including on the 2025 campaign trail: Given that the Office of Housing is “sitting on” hundreds of millions of dollars it isn’t currently spending, why can’t the city just borrow some of “that housing levy money we’re starting to collect now”?

Doing so would require the city to forego some future housing, Rivera acknowledged—the city can’t encumber tax dollars from the housing levy to build housing in the future if that money has already been used to address the budget deficit the city is facing today—but that seemed to her like a sensible tradeoff.

“Nothing is getting built,” Rivera said, “and this money is going to continue to come in. So if it’s not being used today, we know money is continuing to come in, we can make good down the line, on the award or, you know, the investment. But we have needs today, and we have money sitting somewhere today—I’m not an accountant, but it seems to me that we should be able to” use that money now, she said.

Deputy Mayor Greg Wong noted that the housing levy funds, is “not a pot of money the executive has one to touch, because we want to maintain our promises and investments in affordable housing.” By spending revenues from the housing revenue on general-fund purposes, the city would be breaking an implicit promise to voters when they agreed to tax themselves for housing.

And city budget director Dan Eder noted that it isn’t true that affordable housing isn’t getting built; last year, 1,300 new units of affordable housing were partly funded by housing levy dollars.

On its face, it seems somewhat absurd to think of the city asking voters for a new tax to backfill its budget deficit (a deficit exacerbated, last year, by $100 million in new spending the mayor and council hung on the budget like it was a Christmas tree), or for the city to use the housing levy, a voter-approved property tax for housing, to backfill the general fund.

But the city is entering unprecedented times, with federal funding cuts on the way that will force the mayor and council to decide between massive cuts to basic services (except police and prosecution, of course) and reneging on promises to voters about how the taxes they approved will be spent. It’s always an easier decision for elected officials to cut long-term spending that won’t pay off until years in the future than to make tough choices in the present. Just look at what happened to JumpStart.

City Council, Elections, homelessness, King County, Mayor Harrell, Taxes

This Week on PubliCola: July 5, 2025

King County assessor jailed, new public safety sales tax could pay for treatment, and a longtime youth homelessness provider is in tumult.

By Erica C. Barnett

Monday, June 30

Head of Downtown Business Group Lobbied for Digital Kiosk Company; Education Levy Will Help Backfill City’s Budget Deficit

Sung Yang, the board president for the Downtown Seattle Association, is also a registered lobbyist for IKE Smart City, the company that just brokered a deal to install digital ad kiosks that will benefit the DSA financially throughout downtown Seattle. And: The city’s families and education levy is supposed to fund preschool and other additive education improvements, but this year’s will also fund programs previously paid for out of the city’s general fund.

Seattle Nice: What’s Behind the Proposed New Business Tax?

On this week’s podcast, Sandeep and I discuss the proposed ballot measure to increase business and occupation taxes for the highest-grossing businesses—why it’s happening, why it’s happening now, and what it could mean for this year’s elections.

Tuesday, July 1

Local Public Safety Sales Tax Increase Could Include Some Treatment Funding (In Addition to Cops)

City Council President Sara Nelson, anticipating Mayor Bruce Harrell’s introduction of a 0.1-cent sales tax increase for public safety, is proposing that up to 25 percent of the new tax go to addiction treatment; precisely what kind of treatment the tax would fund remains up in the air.

Thursday, July 3

County Assessor Wilson Jailed on Allegations of Stalking, Violating Protection Order

After PubliCola broke the news that county assessor and King County executive candidate John Arthur Wilson had been jailed for stalking his ex-partner, Lee Keller, at her home, we updated this post to include details from Wilson’s bail hearing at the downtown jail, at which Keller spoke about her fear that Wilson would continue to violate her no-contact order against him.

Campaign Fizz: Mallahan Says He Voted GOP in Hopes of Hurting Trump, Sawant Proposes “Battering Ram” Free Health Care Initiative

Accused of voting Republican by the Harrell campaign, mayoral candidate Joe Mallahan first said the accusation was false, then recalled that, actually, he did vote for Tulsi Gabbard in the 2024 primary. And former councilmember (and current Congressional candidate) Kshama Sawant registered a campaign for a local health care initiative her political party has described as a “battering ram” to push nationwide universal Medicaid.

Amid a Long-Brewing Financial Crisis, Homeless Service Provider YouthCare Shuts Down Services, Fires Executive Director

YouthCare, the 50-year-old nonprofit dedicated to ending youth homelessness, has taken drastic actions in recent months to address a financial crisis—laying off a quarter of its staff and closing or consolidating standalone shelter and housing programs. Former staff critical of the agency worry that Youthcare is focusing too much on a future workforce-training hub, the Constellation Center, and not enough on its core mission.

 

Addiction, City Council, Mayor Harrell, Taxes

Local Public Safety Sales Tax Increase Could Include Some Treatment Funding (In Addition to Cops)
L-R: Ballard Alliance director Mike Stewart, Evergreen Treatment Services CEO Steve Woolworth, Council President Sara Nelson, We Heart Seattle director Andrea Suarez, Purpose Dignity Action deputy director Brandi McNeil

By Erica C. Barnett

Standing in Occidental Square on Tuesday morning, City Councilmember Sara Nelson announced a proposal to earmark 25 percent of a forthcoming one-cent sales tax increase to “evidence-based treatment” programs for people with addictions, name-checking Lakeside Milam, the residential treatment center in Kirkland, as an example.

“What I’m fighting for is simple, and it’s to put treatment at the heart and the center of the city’s policy agenda,” Nelson said. “We can’t keep deferring investments in treatment while watching the same people cycle through homelessness, overdose, emergency roomsm and jail over and over and over again.”

Nelson’s office estimated that a 0.1-cent sales tax would bring in about $35 million each year, or a little under $9 million for treatment programs. “When we invest in getting people off the street and into treatment, we prevent crime, reduce emergency room responses and make every neighborhood safer,” Nelson said.

Purpose Dignity Action, which runs the LEAD diversion program and the CoLEAD encampment resolution program, showed up to support Nelson’s proposal. The group, which hasn’t always seen eye to eye with Nelson, has adapted repeatedly to Seattle’s changing political climate, most recently embracing changes to the city’s drug laws that effectively forced LEAD to reverse its approach and go back to partnering directly with police to get new clients, rather than relying on community referrals, which don’t require an arrest.

“To be clear, any serious public safety system must prioritize how we responded with complex behavioral problems, especially when those needs are contributing to harm or distress in neighborhoods and business districts,” PDA deputy director Brandi McNeil said Tuesday. “Ignoring that reality only prolongs the cycle. Confronting it head on is how we build safer, healthier communities.”

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The state legislature gave cities and counties the authority to pass a 0.1-cent tax increase for public safety, including behavioral health care programs, earlier this year, and King County is considering its own version of the tax. Unlike a separate proposal to increase business and occupation taxes on gross receipts above $2 million, the sales tax does not require voter approval; if both taxes pass, Seattle’s cumulative sales tax will rise to 10.55 percent, the highest combined sales tax in the country.

“Lending support for a sales tax increase is not something that I take lightly,” Evergreen Treatment Services director Steve Woolworth said. “However, if this tax to support public safety is adopted, I strongly support dedicating a portion of the revenue to funding low barrier shelter services, jail diversion and alternative response, and the coupling of behavioral health, permanent, and supportive housing.”

Nelson has expressed skepticism about harm reduction and housing first programs in the past, arguing that it’s time to “move beyond the harm reduction phase” toward abstinence-based recovery, which advocates often shorthand as “recovery” to distinguish it from models that try to reduce harm from drug use without conditioning treatment on total abstinence.

And although Tuesday’s speakers all represented groups that embrace harm reduction alongside traditional sobriety-oriented treatment like that offered at Lakeside-Milam, Nelson was flanked by a much larger contingent of allies from “treatment first” groups like We Heart Seattle, Battlefield Addiction, and The More We Love, whose leaders Nelson thanked in her remarks.

We Heart Seattle has not gotten any city contracts—yet—but The More We Love recently received nearly $600,000 after Councilmember Cathy Moore earmarked $1 million for the group. (The lower amount reflects the fact that the group didn’t sign its contract until earlier this month). The More We Love will use the money to expand its shelter in Renton, an abstinence-only facility that “exits” women and their children if they fail to to make it through abstinence-based treatment and stay sober after they graduate. In its contract, The More We Love calls this a “low-barrier, high-accountability” approach to helping victims of sexual exploitation and gender-based violence.

Just before Nelson’s press conference started, the US Senate passed a budget bill that will impose work requirements on Medicaid recipients, depriving millions of Americans of behavioral health care and treatment.

The state law giving cities the authority to pass public-safety sales taxes does not dictate how much has to go to police, behavioral health care, or other programs. In other words: There’s nothing in the authorizing legislation that says 100 percent of the money can’t go to behavioral health care, as opposed more spending on the police department, which already makes up an overwhelming plurality of the city’s budget. Nelson and Mayor Bruce Harrell are among the city’s most ardent proponents of police spending, so it’s unlikely that either will propose increasing the 25 percent cap in Nelson’s bill, though another city councilmember (hi, Alexis Mercedes Rinck!) could.

Asked if she had Harrell’s support for her proposal, Nelson said, “The mayor has indicated support of the principle, of the idea, and it will have to wait until we get closer to the to budget to figure out what, what the departments are proposing for reductions” before talking about how to spend the tax.

Asked if Harrell supported Nelson’s proposal, a spokesperson for the mayor said, “We’ll analyze this proposal in full when we receive it in the context of the overall budget, revenue solutions, and public safety needs.”

Business, City Council, Elections, Mayor Harrell, Taxes

Seattle Nice: What’s Behind the Proposed New Business Tax?

By Erica C. Barnett

This week, we’re talking taxes—specifically, the new business and occupation (B&O) tax proposal that City Councilmember Alexis Mercedes Rinck and Mayor Bruce Harrell dropped, seemingly out of the blue, last week. The tax includes a big exemption that the business community has been seeking for a long time; however, above that threshold—$2 million in gross receipts—the tax will go up substantially.

Because B&O taxes are based on gross receipts, they hit high-grossing, low-margin businesses like restaurants and grocery stores hardest, often leading to higher prices—which is one reason they aren’t generally considered progressive. In fact, neither of the groups the city set up to come up with new progressive revenue sources recommended a higher B&O tax.

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On Monday, as I was posting the podcast, I received a poll testing messages for and against the tax measure. The Seattle Metro Chamber of Commerce is pushing the message that higher B&O taxes will drive up prices and drive larger businesses out of Seattle. “If the City continues to drive away large employers, it will create a domino effect hurting the small businesses this plan is supposed to help while also causing unemployment to rise, office vacancies to increase, and tax revenue to shrink,” one of the test messages claimed. The Chamber is also using some  dodgy math to claim that the city has more than $500 million just sitting around, up for grabs, so expect to hear that message when this thing goes to the ballot.

So what’s really behind the new proposal? The mayor’s up for reelection, facing a progressive challenge from Katie Wilson. Seattle’s facing a budget hole of $250 million even without federal cuts. And supporters of the tax measure may be gambling the Chamber won’t fight too hard against the tax, because it includes a big tax exemption that small- and medium-size businesses have been seeking for years.

With David still away gamboling in parts unnamed, Sandeep and Erica take up these questions and more on this week’s episode of Seattle Nice.