Seattle City Council continues to push for new taxes

Despite a 20 percent increase in per capita revenue since 2010, the City of Seattle continues to pursue new taxes. Recently, two of the latest tax proposals went down in defeat – but perhaps only temporarily.

The first of these measures was a head tax on businesses, proposed by Seattle City Council members as part of the 2018 budget, in which the council considered levying a tax on businesses for each employee. As written, the head tax would have required businesses making above $10 million in gross revenues to pay a yearly fee of around $125 per full-time employee.

Revenue generated from the tax, an estimated $25 million per year, would have been directed toward homeless programs in Seattle. In the end, however, proponents of the tax could not find a majority, and the council voted 5-4 against the budget containing the head tax.

The second tax measure to hit a roadblock is Seattle’s income tax on high earners. Approved unanimously by the city council in July, it would tax income over $250,000 a year for individuals and over $500,000 for couples at 2.25 percent. The tax would also count capital gains as income.

In a suit brought by opponents of the measure, King County Superior Court Judge John Ruhl recently ruled the income tax illegal, finding that the tax violated state law. Seattle is now appealing the case to the Washington Supreme Court.

While these taxes as first proposed are now off the table, expect the push for new Seattle taxes to continue into 2018. Several city council members have promised to reintroduce the head tax issue in the coming months, with some saying they want more time to consider a proposal and talk with businesses and the community before another vote. Meanwhile, depending on the fate of the proposed income tax in the Washington Supreme Court, a tax on high earners may reappear in the form of a capital gains tax in the state legislature.

Last year, REALTORS® statewide opposed the adoption of a new capital gains tax by the legislature because of the impact the tax would have on real estate transactions.