Seattle City Councilmember Cathy Moore announced Friday that she will propose a new city-level capital gains tax to protect housing and food assistance programs as City Hall grapples with a budget deficit of more than $260 million.
Moore’s proposal would implement a 2% tax on capital gains in excess of $250,000. The tax is modeled after the new state-level capital gains tax, which was deemed constitutional by the Washington Supreme Court in 2023 and reaffirmed by 63% of Washington voters who rejected a ballot initiative to repeal it this election. The capital gains tax was even more popular in King County, where 72% of voters rejected the repeal.
Revenues from the Seattle capital gains tax would be used to pay for emergency rental assistance to help people avoid eviction, downpayment assistance for low- and moderate-income homebuyers and to support food assistance programs such as food banks. Moore chairs the Council’s Housing and Human Services Committee.
“After a thorough review of the budget and the mayor’s proposal to utilize payroll expense tax dollars to cover the general fund deficit, it’s clear that our city is still facing the need for additional revenue to address the unmet needs of thousands of households that are rent and food insecure,” said Moore, who represents northwest Seattle’s District 5, in a press release. “My revenue proposal will keep people housed and out of the cycle of homelessness, build stable communities that expand our tax base, and address the hidden but fast-approaching hunger crisis in our city.”
Mayor Bruce Harrell relied heavily on a transfer of money from the Jumpstart payroll expense tax to balance his proposed $8.3 billion 2025 budget and stave off deeper cuts to city staff and services. The payroll tax on large businesses has outperformed projections every year since Seattle began collecting it in 2021.
Harrell wants to transfer $287 million from Jumpstart to balance the general fund budget and put another $43 million into a reserve fund in 2025. The City Council’s initial budget balancing package, released at the end of October, would transfer another $33 million from Jumpstart to the general fund.
Though the city has used a portion of Jumpstart to balance its budget every year since its inception, the previous Council passed legislation requiring 62% of Jumpstart revenues to be spent on affordable housing, 15% on economic development, 9% on Green New Deal climate projects, 9% on the Equitable Development Initiative with 5% for administrative costs.
Housing and service providers have sounded the alarm about the proposal to move a significant portion of Jumpstart revenues into the general fund, arguing that the city needs to be spending more, not less, on affordable housing and other safety-net programs to make a dent in the housing and homelessness crisis.
In addition to the Jumpstart transfer, Harrell’s budget proposes to cut funding for tenant outreach, education and legal services from about $2.5 million to $1.2 million, and would cut rental assistance funding from $1 million to $527,000.
In 2022, Harrell and former Councilmember Teresa Mosqueda formed a Revenue Stabilization Workgroup tasked with researching and recommending potential progressive taxes Seattle could use to shore up projected deficits and ensure Jumpstart didn’t become the city’s rainy-day fund.
That group recommended nine potential progressive taxes, including a city-level capital gains tax. Many of the ideas would require authorization from the state, but the Workgroup argued that a city capital gains tax modeled after the state tax could be imposed without voter approval or state intervention.
At the time, the City Budget Office estimated that a 1% city level capital gains tax would generate between $25 million and $30 million annually.
Progressive taxation was a dividing line in the 2023 City Council elections and again in this year’s special election for the Council’s citywide Position 8 seat.
In 2023, most of the winning candidates either opposed new taxes or said they would consider them only after looking for cuts in the existing budget. During the 2023 campaign, Moore told Cascade PBS that she thought it was important to examine the budget before passing new taxes, but that she supported the idea of a city-level capital gains tax and would consider expanding Jumpstart.
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