Seattle City Councilmember Cathy Moore is proposing a 2% capital gains excise tax that is modeled after the Washington state tax. The tax survived a ballot measure that aimed to eliminate it, with 64% of voters rejecting Initiative 2109. While the state tax is earmarked for public education and school construction, Moore’s proposal would fund initiatives to help people pay rent, housing down payments, and provide food assistance. The tax would go into effect in 2026 and apply to profits on the sales of stocks and bonds exceeding $250,000.
Seattle is currently facing a $250 million shortfall in its general fund, which totals $1.9 billion, as it works on its 2025-26 budget. Moore believes that the new tax could help address significant gaps in critical services, such as keeping people housed, providing shelter for the homeless, offering home ownership opportunities, and addressing the hunger crisis. She plans to introduce her budget proposal amendment at the Nov. 12 meeting of the full city council. Moore, who was elected last year, represents the north end of Seattle.
Supporters of the failed ballot initiative argued that the state tax harms small businesses and innovation, negatively impacting the region’s tech economy. They suggested that the state could do more with the existing tax dollars. The Department of Revenue reported that 3,850 people statewide filed returns associated with their capital gains this spring, though not all would have owed the tax. It is unclear how many Seattle residents would be affected by a local capital gains tax.
Seattle has faced challenges in funding programs that support low-income residents, leading to the passage of the controversial Payroll Expense Tax or “JumpStart” five years ago. The tax was intended to fund affordable housing, homeless services, equitable economic development projects, and Green New Deal investments. It has brought in more revenue than initially projected, with additional dollars being used to support the general fund since 2022. Mayor Bruce Harrell’s budget proposal included the largest reallocation of JumpStart funds to date.
Mayor Harrell does not currently support Moore’s proposed tax, according to his spokesperson. However, he is open to having a more extensive discussion about revenue options. Moore’s tax plan aims to address the gaps in critical services identified through the City Council’s budget review and her work on the Housing and Human Services Committee. As Seattle grapples with its budget shortfall and the ongoing challenges of providing essential services, the introduction of a local capital gains tax could offer a new source of revenue to support those in need.
