Post Detail

Seattle City Councilmember Cathy Moore is proposing a 2% capital gains excise tax modeled on the Washington state tax that on Tuesday survived a ballot measure to nix it.

The tax is lower than the state’s 7% tax rate and would similarly apply to profits on the sales of stocks and bonds that exceed $250,000.

Some 64% of voters rejected Initiative 2109, which would have eliminated the tax that was passed by state lawmakers three years ago.

While the state capital gains tax is earmarked for programs supporting public education and school construction, the city tax would fund initiatives that help people pay rent, assist with housing down payments, and provide food assistance for those in need. It would go into effect in 2026.

The City of Seattle is currently hashing out its 2025-26 budget and coming up short. It faces a $250 million shortfall in its general fund, which totals $1.9 billion. Seattle’s overall budget is $8.3 billion.

“What I’ve learned from the Council’s budget review, and my work as chair of the Housing and Human Services Committee, is that we still have real gaps in keeping people housed, getting homeless persons into shelter, access to home ownership opportunities, and a hunger crisis that is fast approaching,” Moore wrote in her newsletter on Thursday.

The new tax could “address these ongoing significant gaps in our critical services,” Moore said.

Moore plans to introduce her budget proposal amendment at the Nov. 12 meeting of the full city council. She was voted into office last year and her district spans the north end of Seattle.

Supporters of the failed ballot initiative to toss the Washington state tax argued that it harms small businesses and innovation and is detrimental to the region’s tech economy. They suggested the state could do more with the dollars it has.

This spring, 3,850 people statewide filed returns associated with their capital gains, though not all would have owed the tax, according to the state Department of Revenue. It’s unknown how many Seattle residents would be potentially impacted by a local tax.

Challenges in paying for programs that support low-income residents are nothing new for Seattle.

Five years ago city leaders passed a controversial tax intended to help fund affordable housing and homeless services. The Payroll Expense Tax or “JumpStart” evolved out of a years-long battle over how the city should tax employers such as Amazon, which launched in Seattle more than two decades ago and has become the city’s largest employer.

JumpStart is also earmarked to pay for equitable economic development projects, and Green New Deal investments to help the city meet its environmental goals.

The tax has brought in more revenue than originally projected, and since 2022 those additional dollars have been tapped to support the general fund. General fund expenditures cover public safety, administration, education and human services, arts and culture, and other programss.

The budget proposed in September by Mayor Bruce Harrell included the largest reallocation of the JumpStart funds to date.

The mayor doesn’t support Moore’s proposed tax “at this point,” Harrell spokesperson Callie Craighead told the Seattle Times, which first reported on the council member’s tax plan. Craighead said the mayor is receptive to having “a longer and more robust discussion” about revenue options.

RELATED COVERAGE:

• Seattle mayor wants to tap more revenue from payroll tax on big business to plug budget holes
• Initiative to repeal Washington’s capital gains tax pits education funding against business concerns