This November, Seattle voters will decide whether to raise the business and occupation tax on the city’s highest-grossing companies while reducing the tax burden for most others.
Mayor Bruce Harrell and Councilmember Alexis Mercedes Rinck proposed the B&O tax reform in June to offset the impact of federal funding cuts and help small businesses better weather the economic downturn.
Despite concerns from some Councilmembers about the bill and the speed with which it was passed, the City Council voted 9-0 Monday to send the proposal to the Nov. 4 ballot.
If approved by voters this fall, Seattle will raise its B&O rate, increase the B&O tax exemption threshold from $100,000 to $2 million and create a new $2 million standard B&O deduction.
The revisions would result in about 90% of current B&O taxpayers in Seattle owing less, with three-quarters no longer owing the tax at all.
The tax bill for the top 10% highest-grossing businesses will increase, and is projected to bring in an additional $80 million each year. That money would help pay for things like rental assistance for low-income tenants, food security programs, emergency homelessness shelters and immigrant and refugee services, and keep low-income housing providers afloat.
Rinck spoke about the litany of federal impacts that have been discussed in the Council’s Select Committee on Federal Administration and Policy Changes, which she chairs. They include cuts to Medicaid, gender-based violence prevention and response services, immigration and legal defense and food banks.
“We built the Seattle Shield Initiative as a ... strongly vetted response to this constellation of challenges,” Rinck said during Monday’s meeting. “Today we vote on whether to send this more progressive rebalancing of our B&O tax to the voters. Once the voters provide us with this tool, we can ensure that critical city services are maintained despite the challenges our budget or the Trump administration present.”
Councilmember Debora Juarez, who just rejoined the City Council to fill the D5 vacancy left by Cathy Moore’s resignation, celebrated the legislation.
“This policy I believe reflects our collective humanity,” Juarez said. “Making sure … people have food, that people have housing, that they have the basics to live.”
Seattle’s largest businesses and their advocates have roundly criticized the measure.
“Raising the B&O on any employer right now is a bad idea — especially given the economic facts presented [in June] by the City of Seattle itself,” said Rachel Smith, CEO of the Seattle Metropolitan Chamber of Commerce, in a statement after the proposal was introduced. “Regional employment has declined, Seattle office vacancy is one of the highest in the U.S., consumer spending has weakened, there are fewer international visitors expected, and economic uncertainty looms from tariffs. And this proposal comes just months after the legislature passed the largest tax increases in state history.”
Councilmember Joy Hollingsworth said Monday she’s also heard from grocery stores and restaurant groups that operate with high gross revenues but thin profit margins that they will be negatively impacted by the B&O revision.
Though they both voted to send the tax plan to voters, Councilmember Bob Kettle and Council President Sara Nelson raised concerns about the bill.
Nelson said while she appreciates the immediate tax relief the bill would provide to small businesses, she worries about potential unintended consequences for larger businesses, which might respond by leaving Seattle.
She also lamented the speed with which the bill went from the proposal stage in June to passage in August. The Council needed to pass the legislation by Aug. 5 in order to put the measure on this November’s ballot. Nelson said the quick timeline did not allow for sufficient outreach to businesses that will be impacted.
Kettle criticized its framing as a “shield” against the federal administration.
“In my mind this is a budget bill and should not be conflated with the federal administration as a shield bill,” he said Monday. “I’d ask, does the bill address emergency preparedness given the actions [already] taken and to be taken against FEMA? Does the bill shield health care providers across our city, especially on First Hill, to include those central to reproductive health care?”
Pointing to the city’s ongoing budget deficit — now projected to be around $150 million in 2026 — Kettle also criticized earmarking the spending for specific programs like housing and food security, rather than directing all the money to the city’s General Fund.
