Seattle’s city officials have unveiled the Seattle B&O tax proposal, controversial proposal to reshape the business and occupation (B&O) tax system, aiming to ease the burden on small and medium-sized businesses while increasing the contribution from large corporations. Mayor Bruce Harrell and Councilmember Alexis Mercedes Rinck introduced the plan on Wednesday, which would eliminate B&O taxes for businesses earning $2 million or less in gross receipts. To balance the revenue loss, service-based companies with earnings beyond that threshold would see their B&O tax rate rise from 0.427% to 0.65%.
The proposed changes are expected to raise an additional $90 million annually, funding human services and mitigating a $251 million city deficit. Rinck emphasized the shared responsibility of larger corporations, stating, “We’re asking them to contribute to the community that made their success possible.” City leaders argue that 90% of Seattle’s small and mid-sized businesses would benefit, seeing reduced or no tax obligations under the new structure.
Pushback from Business Groups and Concerns Over Economic Impact
Not everyone is on board. Critics, including prominent business organizations, warn that the proposed tax hike could damage the city’s fragile economic recovery. Jon Scholes, CEO of the Downtown Seattle Association, called it “a boneheaded proposal of epic proportions,” expressing concern that taxing large companies could undermine the city’s commercial tax base and shift the financial burden onto residents.
Rachel Smith, CEO of the Seattle Metropolitan Chamber of Commerce, echoed support for small business relief under the Seattle B&O tax proposal but opposed the proposed hike for corporations, citing rising office vacancies and economic uncertainty. Meanwhile, Mayor Harrell countered concerns, saying the city remains “open for business” and aims to foster growth, not drive companies away.
One glaring omission in the public discourse is Amazon, Seattle’s largest employer. The company declined to comment on the proposal. The silence is notable given its historical clashes with Seattle over tax measures, including a now-repealed 2018 payroll tax and the current JumpStart tax affecting companies with large payrolls. Experts suggest Amazon may eventually respond by passing the tax cost onto consumers, as it has with other local regulations.
Support and Reservations from the Tech Sector
Some large employers, like Expedia, expressed cautious support for the Seattle B&O tax proposal. Richard de Sam Lazaro, Expedia’s senior director of government affairs, acknowledged concerns over rising taxes but welcomed efforts to strengthen the city and its small business ecosystem. However, tech advocates raised issues about the policy’s impact on startups. Kelly Fukai of the Washington Technology Industry Association said the initiative, while supportive on the surface, overlooks the unique financial constraints of tech startups.
Public policy expert Jacob Vigdor reinforced these concerns, suggesting that companies like Amazon may respond to the Seattle B&O tax proposal by implementing customer surcharges, as seen with past local regulatory changes. The broader tech community remains wary, especially as cumulative state and local tax changes are leaving startups uncertain about their growth potential.
With over 2,300 companies potentially affected, the Seattle B&O tax proposal must first pass the City Council before it can appear on the November ballot. The coming months will test whether Seattle can strike a balance between business accountability and economic vitality.
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