The ballot measure received an impressive 67.7% approval rating in King County’s unofficial election results released on Tuesday.
The initiative will temporarily waive B&O taxes for small- and medium-sized businesses, including tech startups, with gross revenues of $2 million or less.
To compensate for the revenue loss, larger companies will face a more than 50% increase in their B&O tax rate, rising from 0.427% to 0.65% for service businesses. Only revenue exceeding $2 million will be subject to taxation.
These new tax regulations are projected to generate an additional $81 million annually for human services and other city programs.
With Seattle grappling with a significant budget deficit in the coming years, the city claims that approximately 90% of small- and medium-sized businesses will see a reduction in their B&O tax burden if the proposition is implemented.
Smaller enterprises and startups will no longer have to pay B&O taxes, potentially saving them thousands of dollars per year. For example, a services company generating $1 million in revenue currently pays $4,270 in B&O tax annually at the existing rate.
This tax adjustment introduces a new dimension to the relationship between Amazon, Seattle’s largest employer, and city officials, following years of tension over tax policies.
GeekWire has reached out to Amazon for their perspective on the revised B&O tax structure.
Seattle Mayor Bruce Harrell and Councilmember Alexis Mercedes Rinck introduced the proposal in June as a means to safeguard the city’s small businesses and shield them from potential federal funding reductions. They have also highlighted Seattle’s substantial budget shortfall.
Jon Scholes, president and CEO of the Downtown Seattle Association, criticized the proposal as “a misguided and significant measure” in a LinkedIn post in June. While Scholes advocated for exempting small businesses from the B&O tax, he warned that raising taxes on larger corporations could lead to a reduction in Seattle’s tax base.
Previously: Bold or boneheaded? Seattle’s proposed tax hike on big business draws criticism as Amazon remains silent
