(The Center Square) – The Seattle City Council has rejected a proposed local capital gains tax, but the bill could be brought back as soon as early next year.
Council Bill 120908 would have imposed a local 2% capital gains excise tax applicable to non-retirement financial gains over $250,000 if approved by the city council.
However, Seattle City Councilmember Cathy Moore’s proposed tax failed on Thursday by a 3-5 vote.
The tax was proposed after the state’s 7% tax on the sale or exchange of long-term capital assets was upheld by voters during the 2024 general election.
Approximately 816 Seattle residents would have been subjected to the tax. These residents would have seen a 6.5% to 9% increase in tax burden depending on the capital gains amount and the federal tax rate.
In turn, the tax was anticipated to generate a wide range of revenue: from $16 million to $51 million per year with potential moderate growth thereafter.
Despite the rejection, Moore said she will be bringing the legislation back for a vote in the near future.
“As a number of council members stated the legislation needed more work or that it was the ‘right tax at the wrong time,’” Moore said in a statement. “I will be bringing this legislation back in early 2025 for additional work and consideration.”
During the council meeting on Thursday, Moore said the city needs more revenue streams in order to continue to provide the current level of service and to meet the growing needs the city will encounter, including the anticipated loss of federal funding.
Prior to the council vote, Moore argued that the tax was not a burden on residents that would have been subjected to it.
“I don’t think it’s too much to ask somebody who makes a $750,000 profit on their money to pay $9,700 towards the social safety net of this city,” Moore said in the meeting.
The rejected proposal was based on where a taxpayer’s permanent residence is located, which means residents with multiple Washington addresses could simply switch their permanent address and avoid the tax.
