Budget season is always a time for fierce debate at City Hall and for the past few years, the debate over how to spend proceeds from Seattle’s Jumpstart tax on big businesses has been among the fiercest.
A new bill the City Council is poised to pass Thursday afternoon will likely dampen that debate by removing restrictions on how the new tax can be used.
Jumpstart was created in 2020 to help the city weather the pandemic’s economic impacts in the short term and make progress on key social safety net issues in the long term. That latter priority was codified in 2021 when the Council created the Jumpstart spending plan that mandated 62% of revenues be spent on affordable housing, 15% on economic development, 9% on climate and 9% on community-led equitable development projects, with 5% set aside for administration. Last year, the Council voted to add youth mental health as an eligible category.
But because the tax consistently raised more money than expected and because the city has faced a growing budget deficit amid pandemic fallout, the Council has always used some portion of Jumpstart proceeds to shore up the general fund. Each instance was allowed by the Council for a given year because the city must close its budget deficit, with a hope that eventually the full amount would be directed toward the spending categories their 2021 bill established.
In his 2025 budget, Mayor Bruce Harrell proposed using $287 million in Jumpstart revenue to balance the city’s more than $250 million budget deficit and pay for increased spending. He proposed using another $43 million to create a rainy-day reserve for Jumpstart with the remaining $252 million in projected revenues split among the Jumpstart spending areas.
The mayor also proposed legislation that would eliminate the restrictions on moving Jumpstart revenues into the general fund. In other words, the door would be open to use the big business tax proceeds to pay for police, fire, city parks or nearly any other piece of city operations, rather than the housing, economic development, climate and equitable development projects envisioned by the past City Council.
On Tuesday, the Council’s Select Budget Committee voted 7 to 2 in support of a version of Harrell’s proposal, with Councilmembers Cathy Moore and Tammy Morales voting no.
On Thursday afternoon, the Council took its final vote, passing the bill with another 7 to 2 vote, with Moore and Morales again in opposition.
Affordable housing organizations, human services workers, climate activists and other advocates have fought against the use of Jumpstart to balance the budget and have been upset about lifting the restrictions on its use, arguing that now is the time to make massive investments in affordable housing, homelessness and climate programs to move the needle on the intersecting crises.
City leaders have argued that closing the budget gap with Jumpstart is essential for avoiding deeper cuts to city services and staff.
“We’re using Jumpstart this year to prevent austerity budgeting as we have done every year since the tax has been in place,” said Council Budget Chair Dan Strauss. “While we thought we’d be out of the downstream economic impacts of the pandemic by now when we passed this tax, what we are finding is that we are in the eye of the storm.”
The Council’s new legislation, sponsored by Strauss, expands the eligible categories from the original six — affordable housing, economic development, climate, community development, youth mental health, administration — to include the general fund and a revenue stabilization account.
It maintains the percentages allocated to each category that were established previously but makes them suggested guidelines instead of binding constraints.
In addition, the bill creates a rainy-day fund for Jumpstart money called a revenue stabilization account that will receive 10% of forecasted Jumpstart proceeds each year.
Finally, the legislation eliminates the nine-member Jumpstart Oversight Committee, which was created to monitor Jumpstart spending and assess the tax’s impact on the local economy. The Council appointed five members last year, but the mayor’s office never submitted nominees, and the committee never met.
During Tuesday’s Budget Committee meeting, the Council considered seven amendments to the bill. Morales sought to restore the Oversight Committee and maintain the original restrictions on how Jumpstart may be spent, while allowing 20% of revenues to be used on the general fund. An amendment from Moore would’ve allowed 42.5% of Jumpstart proceeds to be transferred to the general fund with 55% dedicated to affordable housing.
The Council only adopted one of the seven: an amendment from Councilmember Bob Kettle that reinstates the planned sunset of the Jumpstart tax at the end of 2040. Kettle said he wanted to keep the sunset in place as part of a broader effort to reform the city budget and reign in city expenses.
When the Council created the tax in 2020, they included the sunset date as a compromise. Strauss’s legislation would have eliminated that planned end to Jumpstart collection. He argued that given the city’s reliance on Jumpstart to pay for services in the general fund, the tax should be collected in perpetuity.
“Hands off Jumpstart” has been a rallying cry from affordable housing providers, service workers and other community advocates throughout this year’s budget process. On Nov. 12 a group of community leaders held a press conference at City Hall to protest the Council’s plans for Jumpstart and call for them to instead pass new progressive taxes.
“Without Jumpstart’s continued dedication to housing we will not have ‘One Seattle,’” said James Lovell, community development officer at Chief Seattle Club, a Native-led affordable housing and services provider that has benefited from Jumpstart. “We will have One Seattle for the financially stable residents and a separate transitory Seattle where families switch schools every year due to rising rents that stem from a lack of housing. … It will be a city where we will try and offer housing to our unsheltered neighbors, only to come up empty-handed because we didn't build enough units yet again.”
To ease the city’s reliance on Jumpstart revenues and help fund affordable housing, rental assistance and food programs, Councilmember Cathy Moore proposed a city-level capital gains tax modeled on the state-level tax that just survived a ballot measure that would’ve repealed it.
Moore’s proposal, which didn’t pass, would’ve levied a 2% tax on capital gains in excess of $262,000.
“One thing that was revealed through [the Council’s] deep analysis [of the budget] is there’s not a whole lot to be cut or room for efficiencies and improvements,” said Moore at Tuesday’s budget committee meeting. “And there’s not a lot we are actually prepared to cut. I think that comes down to the fact that we are all trying to maintain a high level of service, public amenity and safety in the city. We are not slash and burn by any means. That means we need additional revenue.”
Moore’s colleagues disagreed, however, though several said they were open to further exploring the idea in the coming years. The committee voted 4-4 on Tuesday to not recommend passage of the bill. Councilmember Tanya Woo abstained from the vote, citing the fact that her husband trades stocks.
On Thursday, before the Council took its final vote on the capital gains proposal, Moore gave a passionate speech about the need for taxing wealth to support affordable housing and food security.
"It's not an income tax. We're not taxing your wages, your earnings, your hard work," said Moore. "We're taxing the hard work your money does in the stock market. ... If you’re making significantly more than a quarter of a million dollars in profit over the work your investment has done, we’d like a cent of that please to help people who need to stay housed, to help people who need to be fed, to help people who need to get into their own home."
The Council voted 3-6 to reject Moore's bill. Moore, Morales and Strauss voted yes. Hollingsworth switched from a yes vote in committee to a no vote Thursday. Woo also voted no after getting confirmation from the city ethics department that her husband's job was not a conflict of interest.
Moore said she intends to work with Morales next year to bring the tax back to Council.
Update: This story has been updated with information from the final votes on Jumpstart and the capital gains tax.
Visit cascadepbs.org/donate to support nonprofit, freely distributed, local journalism.
