Seattle’s business tax structure faces a potential major reorganization as Mayor Bruce Harrell and City Council Budget Chair Teresa Mosqueda unveiled an ambitious proposal to streamline the city’s complex tax system. The plan aims to eliminate multiple targeted taxes while creating a simpler, more predictable revenue structure for both businesses and city planners.
The proposed changes would consolidate several existing taxes into a revised payroll expense tax framework. According to figures from the mayor’s office, the reform could generate approximately $270 million annually, closely matching the current revenue from the taxes it would replace. The initiative represents one of the most significant revisions to Seattle’s business tax system in decades.
“This isn’t about increasing the tax burden,” explained Mark Prentice, spokesperson for Mayor Harrell. “It’s about creating a more efficient, transparent system that businesses can navigate more easily while ensuring stable funding for essential city services.” The current system has long faced criticism for its complexity and overlapping requirements.
The plan would eliminate the controversial JumpStart tax, implemented in 2020, which targets high-paying jobs at larger companies. Also slated for removal are the city’s Business and Occupation tax, the Heating Oil tax, and the Transportation Network Company tax applied to rideshare services. These would be replaced by a single graduated payroll expense tax affecting businesses with annual payrolls exceeding $7 million.
Financial analysts at the Downtown Seattle Association have cautiously welcomed the proposal. “The business community has advocated for simplification for years,” noted Jon Scholes, the association’s president. “While we need to examine the specific impacts across various sectors, the concept of streamlining represents a positive direction.”
The proposed tax would implement a tiered structure with rates ranging from 0.4% on the lower end to 1.9% for the highest-earning businesses. Companies with payrolls under $7 million would be exempt entirely, protecting small businesses that form the backbone of many Seattle neighborhoods. City officials estimate this would exempt roughly 95% of businesses operating in Seattle.
The Seattle Metropolitan Chamber of Commerce has indicated initial support while reserving final judgment until more details emerge. “Any tax reform must balance revenue needs with maintaining Seattle’s competitiveness as a place to start and grow businesses,” said Rachel Smith, the Chamber’s CEO. “We appreciate the collaborative approach taken so far and look forward to participating in the discussion.”
Critics, however, question the timing of such a significant change. Katie Wilson from the Transit Riders Union expressed concern that the proposal might reduce future revenue flexibility. “The current JumpStart tax was specifically designed to generate more revenue from companies that can most afford to pay. We need to ensure this consolidation doesn’t ultimately reduce corporate contributions to solving our city’s challenges.”
City Council hearings on the proposal are expected to begin next month, with Council Budget Chair Mosqueda emphasizing the importance of public input. “This isn’t just about tax policy—it’s about how we fund affordable housing, homelessness services, and critical infrastructure,” Mosqueda stated. “We want to hear from small business owners, community organizations, and everyday Seattle residents.”
The proposal arrives against the backdrop of economic challenges facing Seattle, including downtown recovery issues and high office vacancy rates. Proponents suggest the tax simplification could help attract businesses by offering more certainty in planning their Seattle operations. The mayor’s office points to research indicating that tax complexity itself creates significant compliance costs for businesses.
Specific revenue allocations under the new system would prioritize affordable housing, homelessness services, Green New Deal initiatives, and economic development programs. A portion would also be directed to the city’s general fund to support essential services like public safety, parks, and transportation.
The reform faces a complex political landscape. Progressive council members have historically supported higher taxes on large corporations, while more moderate voices have emphasized competitiveness concerns. The proposal attempts to navigate this divide by maintaining similar overall revenue while reducing administrative burdens.
Businesses would see implementation begin in 2025 if the proposal passes, with a planned transition period to help companies adjust their accounting and compliance systems. The mayor’s office has committed to providing technical assistance during this transition.
As Seattle continues working to balance post-pandemic recovery with addressing persistent challenges like housing affordability and homelessness, this tax reform represents a significant policy shift that could reshape the relationship between the city’s government and its business community for years to come.
