Seattle’s Revenue and Forecast Council (RFC) released a report in November 2022 that projected a $141 million shortfall in the city’s 2023-2024 budget. The RFC also projected that the city would face an additional $82.3 million shortfall in the following two years, bringing the total budget hole to over $200 million.
That’s quite the deficit… how’d it get so bad?
Indeed it is! The RFC attributed the budget shortfall to a number of factors, including:
- The decline in property tax revenue due to the COVID-19 pandemic;
- The rising cost of living in Seattle, which is making it difficult for the city to attract and retain employees;
- The increasing demand for city services, such as homelessness and affordable housing.
So how are they going to fix the deficit?
The city of Seattle is currently considering a number of options to fix its budget hole. These options include:
- Raising taxes: The city is considering raising taxes on businesses and wealthy individuals. This could include a payroll tax, a tax on vacant homes, or a tax on luxury goods.
- Cutting spending: The city is also considering cutting spending on a variety of programs, including public safety, parks and recreation, and social services.
- Borrowing money: The city could also borrow money to cover the budget shortfall. However, this would add to the city’s debt burden.
- Finding new revenue sources: The city is also looking for new ways to generate revenue, such as by selling assets or entering into public-private partnerships.
In addition to the above, the city is also working to address the underlying causes of the budget shortfall, such as the rising cost of living and the increasing demand for city services. The city is working to attract new businesses and residents, which would generate more tax revenue. The city is also working to build more affordable housing and to provide more support for people experiencing homelessness.
Updates on Seattle’s Stabilization Efforts
In August of 2023, the Seattle Revenue Stabilization Workgroup sent out a report. The group was created to identify equitable financial solutions to the city’s budget shortfall. The group reviewed information about the city’s spending needs and trends, but was not asked to weigh in on changes in city spending or other structural changes.
The group identified a growing General Fund deficit, which is expected to reach $221 million in 2025 and $207 million in 2026 if the city continues to operate and maintain services at its current level.
The group screened potential revenue ideas using evaluation criteria, including impacts on disadvantaged communities and small businesses, and the ability to support and stimulate sustained economic growth.
The report acknowledges the ongoing work the city is doing to evaluate reductions in spending, identifies other policy choices within the city’s decision-making power, and highlights several suggested areas of future work to inform longer-term decisions.
Some of the key findings of the report are:
- The city’s budget shortfall is projected to grow significantly in the coming years.
- The city’s current tax system is regressive, meaning that it puts a disproportionate burden on low-income residents.
- There are a number of potential revenue options that could be used to address the budget shortfall, but each option has its own advantages and disadvantages.
- The city needs to take a comprehensive approach to addressing the budget shortfall, including both revenue increases and spending reductions.
The report concludes by recommending that the city continue to explore progressive revenue options and develop a long-term plan to address the budget shortfall.
How does this impact me?
Nothings’s official yet, but the Workgroup identified seven revenue options that they believe have the potential to generate significant new revenue for the City of Seattle. These options are:
- Changes to the JumpStart Payroll Expense Tax;
- City-level Capital Gains Tax;
- High CEO Pay Ratio Tax;
- Vacancy Tax;
- Progressive Real Estate Excise Tax;
- Estate Tax;
- Inheritance Tax.
The Workgroup considered a number of factors when evaluating these options, including the potential revenue that could be generated, the impact on different income groups, and the administrative feasibility of implementing the tax.
The Workgroup concluded that the following options are the most promising:
- Changes to the JumpStart Payroll Expense Tax: This option has the potential to generate significant new revenue, and it is relatively easy to implement. However, it is important to carefully consider the impact of any changes on businesses and the overall economy.
- City-level Capital Gains Tax: This option is also progressive, meaning that it would disproportionately affect wealthy individuals. However, it is important to understand the potential impact of this tax on investment and economic growth.
- High CEO Pay Ratio Tax: This option is a relatively new idea, and there is limited data on its potential impact. However, it could be an effective way to address income inequality.
The Workgroup also acknowledged that there are other potential revenue options that could be considered, such as a tax on luxury goods or a tax on short-term rentals. However, these options were not considered to be as promising as the options listed above.
The Workgroup’s report concludes by recommending that the City further explore the potential of these revenue options. The City should also consider the impact of any new taxes on businesses and the overall economy. Ultimately, the decision of whether to implement any new taxes is up to the City Council.