AN ORDINANCE relating to the business and occupation tax; requesting that a…

This ordinance is a Seattle City Council proposal to place a voter referendum on the November 2025 general election ballot. Under Washington State law (RCW 35.21.711), cities face a statutory cap on business and occupation tax rates. To exceed that cap, state law requires voter approval. This ordinance formally requests a special election concurrent with the general election to obtain that approval, which is a procedurally standard mechanism for Seattle to expand its taxing authority beyond state-set limits. The fiscal structure of the proposal is multifaceted. On the revenue side, lifting the B&O rate cap would allow the city to collect additional tax revenue from businesses operating within Seattle. That additional revenue would be earmarked specifically for housing assistance, human services (such as social safety net programs), workforce development, and small business support. This represents a targeted use of new tax authority rather than general fund expansion. On the relief side, the ordinance also proposes increasing the B&O tax threshold, meaning smaller businesses earning below a higher income floor would not owe B&O taxes at all. It also creates a standard deduction within the B&O framework and establishes offsetting tax credits for certain eligible businesses. These provisions are designed to reduce the burden on small businesses and lower-revenue enterprises, addressing a common criticism that gross receipts taxes like the B&O tax are regressive and disproportionately harm smaller firms operating on thin margins. Historically, Seattle has relied heavily on the B&O tax as a local revenue tool because Washington State has no income tax. The B&O tax is a gross receipts tax, meaning it applies to total revenues rather than profits, which critics argue penalizes businesses regardless of profitability. Seattle has periodically sought to expand or restructure this tax, including a high-profile 'head tax' attempt in 2018 that was repealed after business opposition. This 2025 proposal takes a different approach by pairing rate increases with protective measures for smaller businesses and tying new revenues to specific community needs. The stakeholders most directly affected include Seattle-based businesses of all sizes, low-income residents who would benefit from expanded housing and human services funding, workforce development program recipients, and small business owners who may benefit from the new deduction and credit structures. Property owners and residents may also be indirectly affected if increased business taxes influence commercial rents or local economic activity.

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The Seattle City Council has introduced an ordinance that would place a measure on the November 4, 2025 general election ballot asking city voters to approve lifting the state-imposed cap on Seattle's business and occupation tax rates. If voters approve the measure, Seattle would gain authority to levy additional B&O taxes, with the new revenues designated specifically for housing assistance, human services, workforce development programs, and small business support. The ordinance also proposes raising the income threshold below which businesses owe no B&O tax, creating a new standard deduction within the tax structure, and establishing tax credits for certain qualifying businesses to offset some of the increased burden. Supporters of the measure, including affordable housing advocates, human services organizations, and some labor groups, argue that Seattle faces a severe housing affordability crisis and chronic underfunding of social services. They contend that tying new revenue to specific community needs, while protecting smaller businesses through deductions and credits, makes this a more balanced and equitable approach than previous tax proposals. Proponents also emphasize that requiring voter approval respects democratic process and gives residents direct say over the city's fiscal direction. Opponents, including business associations, commercial real estate interests, and some small business owners, argue that any increase in B&O taxes risks accelerating business departures from Seattle, which has already seen some high-profile corporate relocations and office space reductions. Critics of the gross receipts tax structure argue that taxing revenues regardless of profitability is fundamentally unfair, and that new deductions and credits, while helpful, do not fully correct that structural flaw. Some fiscal conservatives also argue that earmarking funds reduces government flexibility to respond to changing priorities. For ordinary Seattle residents and business owners, the practical outcome depends entirely on the November 2025 vote. Residents who rely on housing assistance or human services programs could see expanded support if the measure passes. Business owners would face higher gross receipts taxes in some categories but also new deductions and credits that could reduce net liability, particularly for smaller enterprises. The election will effectively ask Seattle voters to decide how to balance the city's revenue needs against the health of its business environment, a question that has been central to Seattle civic debate for much of the past decade.