Category: Taxes

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.

Business, City Council, homelessness, Mayor Harrell, Taxes

This Week on PubliCola: June 28, 2025
An IKE kiosk in Atlanta

State contracts go unpaid, the homelessness authority considers cuts, council approves digital sidewalk billboards, and more.

By Erica C. Barnett

Monday, June 23

Dozens of Digital Literacy Groups Funded Through a Statewide Grant Haven’t Been Paid Since January. The State Says It Isn’t to Blame.

We began the week with an in-depth feature about a statewide digital equity program, started during the pandemic to provide laptops and training in marginalized communities, that has not been able to pay its contractors for six months. The result: Small nonprofits, including some with just one or two employees, have been forced to shut down programs that help people exiting prison, non-English speakers, and folks living in isolated rural communities access the internet and learn digital skills.

Tuesday, June 24

Seattle Nice: Is It Time to Admit the King County Regional Homelessness Authority Is a Bust?

On this week’s podcast, we discussed the past, present, and future of the King County Regional Homelessness Authority, an agency established with the lofty goal of rebuilding the region’s homelessness system from the ground up. It hasn’t panned out that way.

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Wednesday, June 25

Towering Vertical Billboards Coming Soon to a Sidewalk Near You

The Seattle City Council approved a 30-year agreement to allow IKE Smart City, a Columbus, Ohio-based advertising company, to install 30 digital billboards, each 8’4” tall, on sidewalks throughout downtown Seattle, plus another 50 in other business districts across the city in the future. The Downtown Seattle Association, a private business group, will receive the profits from ad sales.

Thursday, June 26

Proposed Business Tax Increase Would Raise $90 Million a Year While Exempting Most Small Businesses

City Councilmember Alexis Mercedes Rinck and Mayor Bruce Harrell proposed a ballot measure that would increase the city’s business and occupation (B&O) tax rates while exempting gross revenues under $2 million, producing an estimated $90 million a year in new revenue to pay for housing stability, homeless services, food security, and small business sustainability.

Council Can’t Wait to Vote “Hell Yes” on Bills Cracking Down on Graffiti and “Nuisance” Bars and Clubs

The city council took up two bills designed to crack down on what Councilmember Bob Kettle calls the “permissive environment” in Seattle. One would empower the City Attorney to fine graffiti taggers and those who “encourage” them at a rate of $1,000 per tag. The second would give the city authority to penalize and shut down businesses because of crimes their patrons commit in “proximity” to their property, including misdemeanors like using drugs or drinking in public.

 

City Council, Elections, Mayor Harrell, Taxes

Proposed Business Tax Increase Would Raise $90 Million a Year While Exempting Most Small Businesses

By Erica C. Barnett

On Wednesday, City Councilmember Alexis Mercedes Rinck and Mayor Bruce Harrell proposed a ballot measure that would increase the city’s business and occupation (B&O) tax rates by about 50 percent and use the proceeds to fund programs that support housing stability, homeless services, food security, and small business sustainability.

The proposal, which could appear on the November ballot, would exempt businesses’ gross receipts up to $2 million, which would increase the number of businesses who don’t have to pay B&O taxes to about 16,500, or around 76 percent of businesses in Seattle. The remaining businesses would have to pay the tax on all revenues above $2 million. The exemption has been a longtime goal of the Seattle Metro Chamber of Commerce, which has argued that the current exemption is set too low, at $100,000, to provide tax relief to most of the city’s small businesses.

After accounting for the expanded exemption, which would cost the city about $30 million, the tax increase on larger businesses would bring in an estimated $90 million a year.

Speaking to PubliCola on Tuesday, Rinck acknowledged that the business and occupation tax is “not without shortcomings”— for instance, high-revenue, low-margin businesses like grocery stores and restaurants tend to increase prices in response to higher taxes, passing costs on to consumers. But, she said, the city is “looking at an urgent situation, where we’re being confronted with federal funding cuts” that stand to harm Seattle’s most vulnerable residents, including potentially steep reductions in federal spending on homelessness, housing, and human services.

“[The plan] creates some tax relief for small businesses, and it’s a really great opportunity for us to provide that support for small businesses while asking some of our large businesses to pay more of their fair share to keep the city running and help our most vulnerable neighbors,” Rinck said.

On Wednesday, Rinck said the tax increase, which she has dubbed the Seattle Shield law, will protect essential programs from Trump-era cuts. “And here’s what makes this moment special: We’re not imposing this on Seattle, we’re trusting Seattle,” Rinck said. “You choose whether we protect each other or abandon each other, and you choose what kind of city we want to be.”

State law prohibits the city from increasing the business and occupation tax without a public vote. One advantage of a voter-approved tax is that, unlike the council-approved JumpStart tax, it can’t be easily reallocated to new purposes based on the transitory whims of a mayor or city council.

The proposal includes specific spending categories—broadly, housing stability for low-income tenants; small business assistance; services for people facing homelessness, food insecurity, or gender-based violence, and protections for vulnerable workers through the city’s Office of Labor Standards. If the measure passes, these categories would have the force of law.

According to the most recent revenue forecast, the city is facing an unanticipated budget shortfall of more than $240 million over the next two years, with or without additional cuts to federal programs that fund services in Seattle.

The city has two business and occupation tax rates for different kinds of businesses; one, which applies to all retail businesses (and five other business categories) would increase from 0.222 percent to 0.34 percent if voters approved the new tax. The other, which applies to freight transportation and professional services, would increase from 0.443 to 0.65 percent.

By pairing a tax increase with a tax exemption, the proposal puts the reflexively anti-tax business community in a somewhat awkward position. In an email blast about the forthcoming proposal last Friday, Seattle Metropolitan Chamber CEO Rachel Smith praised the proposed exemption, while arguing that a new tax will harm Seattle’s economy and drive businesses away.

“While proposal details have not been released, one component would expand the B&O exemption for very small businesses with an annual gross under $2 million—a good policy that we support,” Smith wrote. “But taxing all of our other businesses to pay for it—when the city has $800 million in unspent revenue—is the wrong move.”

In a statement on Wednesday, Smith said the new proposal “has been rushed, [and] the beneficiaries and payers have not been sufficiently identified or engaged. Everyone deserves to understand the impact of any proposed tax restructuring with more than just 45 days of consideration before heading to the ballot.”

The Chamber’s $800 million estimate refers to the money allocated, but not yet spent, from the JumpStart payroll tax (which funds, among other things, the Equitable Development Initiative, programs to mitigate the impacts of climate change, and affordable housing); funds allocated by the Office of Housing through the voter-approved housing levy; and an estimated $200 million in budget funds that were allocated, but not spent, last year.

“Let’s be clear: Seattle isn’t facing a deficit, in fact, they can’t spend the money they have budgeted today,” Smith wrote.

Budget experts and proponents of the legislation confirmed that most of the money Smith identified can’t easily be moved from place to place—it isn’t possible, for example, to pull money allocated to a signed contract away from that project just because it didn’t get underway by the end of the year.

Additionally, the city’s annual “underspend” stretches across multiple city departments that have different reasons for failing to spend their full budget by the end of the year. It’s legitimate to ask city departments to explain why they aren’t spending all the money they get, and to establish polices to address this perennial issue, but the answers are bound to be complicated. Requiring city departments to unilaterally forego unspent money at the end of each year without knowing the reason each department ended up under budget could be a recipe for budget chaos.

Harrell, whose 2021 run for mayor got a big boost from Chamber members like Vulcan and Goodman Real Estate, stands to benefit politically from allying with Rinck on the taxing measure even as he risks pissing off his deep-pocketed business backers: His leading opponent, Katie Wilson, is outflanking him on the left with a campaign focused on progressive revenue, housing abundance, and access to safe, reliable transit. Recent polling described to PubliCola suggests that Harrell is vulnerable to a challenge from the left.

Wilson, a longtime proponent for progressive revenue, said in a statement that she’s “glad that Mayor Harrell is backing this proposal coming from Councilmember Rinck’s office,” because it will help the measure move through the mostly Harrell-aligned council.

“It’s clear that Harrell is terrified he won’t win re-election and he suddenly feels the need to show progressive leadership,” Wilson added. “It’s disappointing that it takes the threat of being unseated for our mayor to do the right thing.”

While progressives who support raising revenue to preserve city services and respond to federal budget cuts argue that a higher B&O tax that exempts smaller businesses is progressive, the tax is generally considered regressive because it has a greater impact on smaller businesses and those that operate on slim margins, and because businesses generally pass B&O tax increases on to consumers in the form of higher prices. Exempting most businesses from the tax arguably eliminates the first problem, but it doesn’t directly address the second.

Complicating matters, the city is planning to take up separate tax increase soon: A 0.1-cent sales tax hike to pay for public safety, which the state legislature authorized earlier this year. King County is currently considering its own 0.1-cent tax increase; together, the two tax increases, which do not require voter approval, would increase the sales tax in Seattle to 10.55 percent, the highest combined sales tax rate in the country.

Asked about the potential sales tax increase on Wednesday, Harrell said it’s “on the table for discussion, but because we understand the regressive nature of it, we are treading very carefully.”

Mayor Harrell, Police, Taxes

SPD Celebrates Its Hiring Spree. The Only Thing That’s Missing: Women

By Erica C. Barnett

Mayor Bruce Harrell and acting Police Chief Shon Barnes touted SPD’s latest hiring numbers on Monday. Standing in a gym at SPD’s training facility in Georgetown, the two men stood in front of by 15 members of the Seattle Police Department recruit class of 2025—a group of people Harrell said “truly represent our community.”

One thing was notably absent in the backdrop of new recruits: Women. SPD, which is facing multiple lawsuits from women alleging gender discrimination and harassment, has frequently said that recruiting more women is a top priority, but the department has not announced any specific efforts to improve the department’s well-documented culture of misogyny.

In 2021, SPD signed the “30 by 30” pledge, committing to have a 30 percent female recruit class by 2030.

To say they’ve failed to make progress is an understatement. Last year, SPD only managed to hire 12 women—just 14 percent of its 84 new hires. This year, that figure has dropped to just eight percent—an abysmal five women out of 60 officers hired so far this year.

Perhaps it’s unsurprising that a city so hyperfocused on increasing the number of bodies in police uniforms has failed to register alarm that almost all those new bodies are male. If your whole pitch for SPD is that you can make six figures and get a hiring bonus, you probably aren’t going to reach people who aren’t considering a job in law enforcement in the first place, particularly those who have heard about SPD’s reputation as a place where women get harassed and overlooked.

Still, it was a bit of a visual jump-scare to walk into SPD’s training facility and see that the city had chosen a phalanx of preternaturally buff young men to serve as the visual backdrop for their big hiring announcement. (One young woman became visible in the back of the group partway through the press conference.)

I asked Barnes—who received wide praise in Seattle for maintaining a better gender breakdown  at the Madison, WI police, where he was chief before coming to Seattle—what the department was doing to address its male-dominated culture and proactively recruit more women. (Barnes had just finished telling three brief anecdotes in which various men expressed an interest in becoming a Seattle police officer to him personally).

“I looked at those numbers, and those numbers are not exceeding my expectations,” Barnes said. “Last year we hired 10 females,” he continued, misspeaking slightly. “This year we have five. So we still have some work to do on that.”

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“Maureen McGaugh”—the founder of 30 By 30— “is a close personal friend of mine,” Barnes continued. “And so I had a conversation this morning with staff about making sure that we give a second look to any female applicant before we give them a rejection letter—like, what’s going on there?”

“But you know, a lot of police departments struggle with” hiring women, Barnes said. “I think for me, it’s making sure that any applicant, no matter your demographics, you know that Seattle Police Department has a place for you.”

Overall, the 60 new hires represent a net increase of 36 officers, after factoring in 24 departures so far this year.

The police department remains by far the biggest portion of the city’s general fund budget. On Monday, Harrell said he would consider the new option of a 0.1 percent sales tax for public safety that the state legislature approved last week, using public safety as the “lens by which we will make decisions” on the upcoming budget. “That doesn’t mean that housing and child care and education and other climate change, the other strong components of our ecosystem, are not important,” Harrell said. But, he added, “we have to center public safety to make sure that our kids are safe.”

The local-option tax has to be spent on criminal justice, but the legislation adopts an expansive definition of that term that includes diversion, public defense, and prevention programs, which King County Councilmember Girmay Zahilay said he would want to fund, in addition to more prosecutors and cops, if the county passes their own version of the tax.

The city is facing a projected budget shortfall of $241 million over the next two years, on top of previous budget forecasts that showed growing deficits starting in 2026. Thanks to the council’s actions last year, the JumpStart tax, originally dedicated to four specific spending categories, is now an all-purpose bucket of money the city can slosh into the general fund at will, but the council may soon have to reckon with the volatility of a tax that depends overwhelmingly on fewer than a dozen companies.

King County, legislature, Taxes

Could a Sales Tax Hike for Criminal Justice Programs Save the County’s Budget?
King County Councilmember Girmay Zahilay speaks at a recent press conference on state funding cuts.

By Erica C. Barnett

Late last week, King County Council chair Girmay Zahilay and budget chair Rod Dembowski sent a letter urging acting King County Executive Shannon Braddock to send down legislation imposing a new sales tax of 0.1 percent to boost funding for the county’s criminal legal system, including sheriff’s deputies, prosecutors, public defenders, and diversion programs.

State legislators approved a bill giving local jurisdictions the new taxing authority last week; Governor Bob Ferguson hasn’t sign the bill yet, but he expressed support for the proposal earlier in the session, which ended on Sunday.

With the county facing an estimated $160 million shortfall in its general-fund budget over the next two years, Zahilay said the new revenue would be a game-changer. “If we don’t find a solution, we will see deep and painful cuts to services that the community relies on,” like police, prosecutors, and public health clinics, Zahilay said. “It would mean hundreds and hundreds of positions cut out of King County government.”

The new tax could be used on a variety of programs that fall broadly in the “criminal justice” category, explicitly including reentry programs, public defenders, diversion programs, and “Local government programs that have a reasonable relationship to reducing the numbers of people interacting with the criminal justice system including, but not limited to, reducing homelessness or improving behavioral health.”

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Last week, county budget director Dwight Dively told the council that the areas most at risk for cuts (some of them due to potential state budget cuts that did not materialize) are public health and the Department of Community and Human Services, which funds services for homeless King County residents.

Because DCHS is funded largely by the state’s document recording fee on real-estate transactions, its funding has declined dramatically as the housing market has slowed. When that happens, Dively said, “either we have to immediately cut funding for homelessness services, and we all understand the consequences of that, or we have to find another revenue source to at least temporarily backfill that, and that’s the general fund.

So what does that have to do with a criminal-justice sales tax? According to Zahilay, because the legislation did not include language banning “supplantation”—which would have barred the county from using the tax to free up general-fund dollars for unrelated purposes—the tax could help address that looming $160 million deficit. (The county’s deficit is smaller than the city’s, in part, because more county services are funded with dedicated funding sources, like levies.)

That “means that we could absolutely use these funds to fund our criminal justice efforts and redirect funds that would otherwise go toward those initiatives … to fund other things,” Zahilay said. “Based on the estimates that I’ve seen, this new tax would be enough to fund our entire general fund shortfall.”

The sales tax remains the primary tool local governments have for raising funds without passing a property tax levy; it’s a regressive tax because people with lower incomes pay a larger percentage of their income on sales taxes than people who make more. “I was hoping we’d have more options [from the legislature], beacuse out of all the types of taxes, I believe the sales tax is the most regressive one of all,” Zahilay said. “But I’m definitely grateful that we have an option to save our general fund and critical services.”

City Council, Taxes

Seattle Nice: Capital Losses

Is the Seattle City Council more progressive than we thought?

By Erica C. Barnett

On the most recent episode of Seattle Nice, we talked about the Seattle City Council’s vote on the capital gains tax, which was still upcoming when we recorded last Wednesday afternoon.

At the time, we knew the tax, proposed by Councilmember Cathy Moore, was doomed to fail; the 2 percent tax on annual investment profits above $262,000 lost on a 5-4 vote in the budget committee, which includes all nine council members. I noted that with progressive Alexis Mercedes Rinck replacing next year, “if they have another vote and it goes the same way, then capital gains will pass.”

But that, it turned out, was a big “if”—a fact that became obvious later on the day we recorded, when Joy Hollingsworth flipped her vote and voted “no” on the tax, giving the anti-tax side a six-vote supermajority. Strauss and Hollingsworth, Sandeep noted, were both “squishy” yes votes—he’d heard the week before that they were both opposed—which means that the loss of Woo’s no vote won’t be enough to flip the council in favor of progressive revenue.

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The council’s five recently elected members, now entering the second year of their terms, have voted largely as a bloc, with some exceptions—Joy Hollingsworth and Rob Saka sometimes vote with Morales, the council’s one consistent progressive, on legislation related to equity, and Moore has been unpredictably idiosyncratic, supporting police surveillance and crackdowns on sex workers and drug users while . The addition of one more progressive council member won’t change that mix, on capital gains or any other issue.

This council majority has made clear that their goal is to reverse many of the policies and spending priorities of the previous council, and their budget certainly accomplishes that—lavishing money on police, jails, encampment removals, and downtown beautification while cutting funding for tenant services, parks, workplace equity, and food assistance.

As someone who has voted with the majority on all of these priorities and more, Moore would seem to be well-placed to talk her centrist-to-conservative colleagues into supporting a popular tax. But this inexperienced new council, though sometimes unpredictable (who could have guessed that Rob Saka would vote against a JumpStart tax amendment he co-sponsored, then turn around and vote for a substantively identical amendment a few minutes later?) got elected with support from the mayor, and have voted mostly in lockstep with Harrell’s agenda. So far, only Moore has shown signs of independence on the revenue issue; for most of the council, it remains an article of faith that the city can fix all its problems, from the housing shortage to the fentanyl crisis, without more money.