Last year, the City of Seattle established a Revenue Stabilization Work Group to “evaluate and pursue innovative options to stabilize revenue and look for opportunities to reduce the regressive nature of Seattle’s tax system on low-income, working, and middle-class residents.” This is in response to a structural deficit in the city’s general fund. The work group has now released its report.

Although the work group was focused on revenue options, it notes,

There is likely no single action that could be taken to fill the projected General Fund gap. Rather, multiple strategies will likely be needed to provide a pathway towards a sustainable City government that equitably meets the needs of its constituents while also addressing the projected 2025-2026 General Fund shortfall.

Additionally, “The Workgroup explicitly acknowledges that more work is needed before implementing any new revenue ideas to determine: the appropriate tax rates, which individuals and businesses would be expected to pay the tax, what exemptions (if any) would apply, and other considerations, including potential unintended consequences.” Further, the report notes that the City did not provide any legal analysis of the proposals.

The work group narrowed a list of 63 revenue ideas down to nine options based on their revenue potential, progressivity, economic impact, feasibility, legal authority, and timing considerations. That said, the report notes that many of the nine options could require authorization from the state. (Note, too, that as these ideas are not fully fleshed out in legislation, it’s impossible to estimate how they measure up on many of these parameters.)

Here they are, in the order presented in the report:

1. Changes to the JumpStart Payroll Expense Tax. The report notes that these could take the form of increasing the tax rates or increasing the payroll or salary thresholds. (We wrote in detail about the city’s payroll expense tax, which is highly concentrated and volatile, here.)
2. City-level Capital Gains Tax.
3. High CEO Pay Ratio Tax. According to the report, this would be a tax on businesses with a high ratio of CEO pay to median worker compensation and it could be implemented as a surcharge on the payroll expense tax.
4. Vacancy Tax. This would be a tax on vacant residential and/or commercial units in the city.
5. Progressive Real Estate Excise Tax. This would be “an additional tax increment on sales of property over a certain price.”
6. Estate Tax. The city could “impose an increment onto the State structure.”
7. Inheritance Tax. The report notes that no U.S. city has an inheritance tax and that this would require “a new, complex and costly administrative approach to track and enforce the tax.”
8. Congestion Tax.
9. Income Tax. They seem to be suggesting a flat, 1% income tax.

The city is under no obligation to move forward with any of these options. The Seattle City Council’s Finance and Housing Committee will meet tomorrow morning to discuss the work group’s report. A memo for the meeting from Central Staff notes,

From a purely practical perspective, in terms of the legislative process, Option 1 (changes to the JumpStart tax) and Option 2 (City-level capital gains tax) have legislation ready, making them best positioned to be considered on a shorter timeframe. The remaining seven options will require more time to research, develop legislation, and, in some cases, may require changes to State law. All nine options have policy and administrative considerations to be explored in further development.