(The Center Square) – In November, Seattle voters will decide on a major restructuring of the city’s business and occupation tax targeting the city’s largest businesses.
The proposal – announced by Seattle Mayor Bruce Harrell and City Councilmember Alexis Mercedes Rinck – would raise the business and occupation tax, or B&O tax, threshold exemption from the current $100,000 to $2 million in gross revenue.
The city council unanimously approved the proposal on Monday.
According to Harrell’s office, the tax restructure would lead to approximately 90% of businesses owing less than they do today. About 76% of Seattle businesses are exempt from the B&O tax altogether. The plan would raise $81 million, down $9 million from the original projection of $90 million in generated revenue when the bill was first announced.
The funding intends to protect city programs against threats from the Trump administration to cut federal dollars if the city does not comply with executive orders related to DEI practices and federal immigration enforcement.
“Once the voters provide us with this tool, we can ensure that critical city services are maintained despite the challenges our budget or the Trump Administration present,” Mercedes Rinck said during a special meeting on Monday.
Out of the projected $81 million, revenue would be dedicated to city funding in food access, gender-based violence services, small business supports, homelessness prevention, and support for workers’ rights and protections, according to a fiscal note. Up to $30 million would also be used to pay for implementation costs and ongoing administration of the tax.
Some members of the council voiced concerns with the proposal. Councilmember Maritza Rivera said the city is avoiding a more in-depth analysis of its programs that could be cut in order to relieve its budget.
“I will continue to push for budget reform at the city so we are not in this constant state of deficit. It is really unacceptable and it is bad governance for us to be in a constant deficit because we don’t want to take a hard look at our budget and our programs,” Rivera said. “It is not OK to constantly bring about more taxes of this nature without doing the work.”
City Council President Sara Nelson also supported the bill, but said it was a rushed process for the scale of change the legislation would implement if passed by Seattle voters. The legislation was first proposed in late June.
Jan Duras, an economist with the city, said a lot of the impacts of the B&O rate increase on small businesses will depend on the behavior of large businesses in response to the rate increases.
The B&O tax restructure proposal comes amid a more positive outlook on the city’s expected revenue over the next two years. When the Seattle Economic and Revenue Forecast Council made its’ April revenue forecast for the next two years, it took a pessimistic view that the city’s revenue would be $241.5 million less than anticipated. In its latest forecast, the projected deficit for the upcoming budget is now closer to approximately $143 million.
