Seattle City Council members recently examined a proposed tax overhaul that would temporarily eliminate business taxes for thousands of small companies while significantly increasing rates on major revenue generators like Amazon, Zillow, and Expedia. The Seattle Shield Initiative aims to abolish the business and occupation tax for companies earning up to $2 million annually, with higher rates for those exceeding that threshold. The restructuring is expected to generate an extra $90 million annually, funding human services programs in the city. This proposal comes amid Seattle’s $251 million budget deficit, exacerbated by anticipated federal funding cuts.
Council raises concerns
Attendance was sparse at the committee meeting, but council members raised several potential issues:
- Cumulative effects: Councilmember Bob Kettle questioned how the proposed B&O changes would interact with the existing Payroll Expense Tax, also known as JumpStart, which already targets large employers including Amazon. Kettle criticized Seattle’s habit of implementing individual tax solutions and advocated for a comprehensive approach for long-term success.
- Business ecosystem impact: Council President Sara Nelson sought feedback from small- and medium-sized businesses that would indirectly face higher taxes due to their partnerships with larger companies. She emphasized the need to consider the impact on vulnerable businesses, even if they don’t directly pay higher taxes.
- Grocery stores at risk: Councilmember Joy Hollingsworth expressed concerns about grocery stores, highlighting their slim profit margins despite appearing profitable based on gross revenue. She stressed the diversity among big businesses and the need to protect community anchors.
- Revenue volatility: City staff noted that the proposal could reduce the B&O tax base significantly, potentially leading to less predictable revenue collections.
The measure must receive City Council approval before proceeding to the Nov. 4 general election ballot. If approved, the new tax structure would be effective from 2026 to 2029, with the possibility of renewal.
Key details
Key points of the Seattle Shield Initiative include:
- The B&O tax threshold exemption is raised from $100,000 to $2 million in gross revenue.
- Businesses exceeding the threshold would not pay tax on the first $2 million in revenue.
- About 76% of small- and medium-sized businesses would no longer pay the tax.
- Approximately 90% of all businesses would pay less than their current tax amount.
- Retail, wholesale, and manufacturing businesses above the $2 million exemption would pay 34 cents per $100, up from 22 cents.
- Service companies would see an increase from 43 cents per $100 to 65 cents.
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