The tax is intended to support public safety programs, including expanding Seattle’s non-police emergency response teams. While city officials describe the measure as essential to filling a projected budget gap of over $140 million by 2027, many business owners and residents worry that higher sales taxes could further strain affordability and consumer spending.

What This Means for Local Businesses

Sales tax increases often have ripple effects. For small retailers, restaurants, and service providers, a higher rate can lead to reduced customer spending, especially as consumers weigh every dollar amid inflation and rising living costs.

A Seattle café owner or boutique retailer, for example, might find it harder to keep prices competitive when nearby cities in King county maintain slightly lower tax rates. Even small differences can impact sales volume over time.

The proposed 0.1% increase may sound minor, but on large purchases—like a $25,000 vehicle—it adds about $25 in taxes. For customers already stretched thin, those small increments add up.

A Balancing Act: Safety vs. Affordability

City leaders supporting the measure argue that it’s a necessary investment in public safety and community well-being. Mayor Bruce Harrell’s 2026 budget proposal allocates $9.5 million to expand the Community Assisted Response and Engagement (CARE) department, doubling the city’s non-police crisis response team from 24 to 48 responders.

Opponents, however, emphasize that Seattle’s cumulative taxes (from transportation and education levies to property and business taxes) are squeezing both residents and small businesses. As Council member Maritza Rivera noted, “We’re essentially taxing people who are already struggling.”

What Small Business Owners Can Do

If you operate a small business in Seattle, now’s the time to plan ahead:

1. Adjust pricing and cash flow forecasts. Even minor tax rate changes can alter your margin projections.
2. Communicate clearly with customers. If price adjustments are needed, explain why. Transparency builds trust.
3. Look for tax credits or deductions. Work with your CPA to identify federal or state incentives that can offset local tax burdens.
4. Monitor upcoming city budget developments. New levies or restructuring (like business & occupation tax changes) could affect you further.

Seattle’s entrepreneurs are resilient, but every tax increase makes operating in the city more challenging. Balancing civic investment with economic sustainability remains one of the biggest issues facing the city’s business ecosystem.

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Take Gary’s Place, a local waterfront arcade: equipment prices have already risen 10–15% due to tariffs. To shield customers from higher costs, owners Elyssa and Matt Cichy are absorbing the increases themselves and paying for additional storage to stockpile inventory.

“The uncertainty of not knowing what is going to happen next is keeping us up at night and making this so stressful,” Elyssa said.

Seattle businesses are finding it increasingly difficult to compete for container cargo and maintain consistent inventory, and the impact is particularly felt among startups with tight budgets.

Actionable Tips for Seattle Small Businesses

While tariffs are largely outside your control, there are steps you can take to mitigate their impact and protect your bottom line:

1. Diversify Your Suppliers
Don’t rely solely on one country or manufacturer. Look for alternative suppliers in countries not affected by tariffs or explore domestic options. Diversifying your supply chain reduces vulnerability to sudden cost spikes.

2. Stockpile Strategically
If certain products are essential for your business, consider stockpiling ahead of expected tariff increases. Be mindful of storage costs and shelf-life limitations—stockpiling works best for non-perishable items or products with predictable demand.

3. Reassess Pricing Strategies
Consider small, gradual price adjustments instead of absorbing all cost increases. Transparency with customers can help: explain that minor price adjustments are necessary due to rising import costs.

4. Explore Local Sourcing
Whenever possible, source materials and products locally. This not only reduces exposure to tariffs but can also shorten delivery times and strengthen community partnerships.

5. Evaluate Your Cash Flow
Tariffs can create sudden spikes in expenses. Work with a CPA or financial advisor to stress-test your cash flow, identify potential shortfalls, and ensure you have reserves to handle unexpected costs.

6. Leverage Tax and Duty Incentives
Some businesses may qualify for duty deferrals, exemptions, or credits depending on the type of product and tariff classification. A CPA familiar with import taxes can help you navigate these options.

7. Negotiate with Suppliers
Tariffs are only one part of your cost. Renegotiate contracts with suppliers to share costs or lock in current rates where possible. Bulk orders or longer-term agreements may reduce per-unit costs.

8. Adjust Inventory Management Practices
Use data to identify high-demand items and reduce orders on low-turnover products. Efficient inventory management minimizes carrying costs and avoids tying up cash unnecessarily.

9. Build Strong Customer Communication
Keep your customers informed about supply delays or minor price adjustments. Transparency fosters loyalty and helps maintain trust during uncertain times.

10. Monitor Tariff Changes Regularly
Trade policies can change quickly. Stay informed through business chambers, trade associations, and your CPA to ensure your strategies align with the latest developments.

Conclusion

Tariffs are creating real challenges for Seattle small businesses and startups, from higher costs to disrupted supply chains. However, proactive planning, financial foresight, and strategic supplier management can help mitigate the impact.

Partnering with a CPA or financial advisor who understands import-related taxes and trade regulations can give you a competitive edge; helping you manage cash flow, reduce risk, and maintain profitability during uncertain times.

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1. Increased B&O Tax Rates & Surcharges (HB 2081) 🚨

Effective Oct 1, 2025, Washington will raise B&O (Business & Occupation) rates across most industries and introduce a new surcharge on large employers — especially services, financial firms, and tech companies. Even small- to mid-sized businesses face higher costs on gross revenue, regardless of profitability.

2. Sales Tax Expansion to Services (ESSB 5814)

Starting October 2025, sales tax will apply to numerous previously untaxed services—advertising, software development, IT support, payment processing, and more. Small service firms in Seattle and statewide must update billing, invoicing, and checkout systems to remain compliant .

3. New B&O Tax Classification for Card Processing (HB 2020)

A new B&O rate category for payment card processing services comes into effect in 2026. Payment processors and businesses offering those services need to prepare for an additional excise component and potential deductions.

4. Capital Gains Tax Tweaks (SB 5813 & SSB 5314)

In 2025, Washington increased the capital gains tax from 7% to effectively 9.9% on gains over $1 million. Changes also include improved documentation rules for 1099-B reporting and a state capital gains credit replacing the old B&O deduction credit.

5. Elimination of the Employee Ownership Program (SHB 2047)

Starting July 2026, Washington will sunset its Employee Ownership trust program that allowed businesses to receive B&O credits for offering shares to employees.

6. New Taxes on Zero‑Emission Vehicle (ZEV) Credits (SHB 2077)

A new excise tax on ZEV credits—those earned by selling or banking EV credits—is effective May 2025. If your small business deals in clean tech or EV incentives, take note Washington Department of Revenue.

7. Federal Pass‑Through Deduction (One Beautiful Bill Act)

Nationally, the 20% Qualified Business Income (QBI) deduction for pass-through businesses like S-Corps and LLCs was made permanent in July 2025 under the “One Big Beautiful Bill” Act. This federal boost helps reduce taxable income for small business owners.

Of course, brief digression as this gets into some heated debates. Here’s the pros and cons of this bill:

🟢 Supporters say:

• It made permanent the 20% Qualified Business Income (QBI) deduction for pass-through entities (like S Corps and LLCs), a popular tax break for small business owners.
• It simplified some federal filing requirements for freelancers and gig workers.
• It aimed to stimulate small business growth by preserving deductions and extending bonus depreciation provisions.

🔴 Critics argue:

• The bill disproportionately benefits high-income business owners, including real estate investors and larger pass-throughs.
• It adds to the federal deficit, with some estimates putting its 10-year cost over $700 billion.
• It limits offsetting tax credits in other areas (such as green energy or low-income housing) to pay for its provisions.
• Critics say the bill’s name was more marketing than substance, making it harder for the public to debate its contents seriously.

🟡 For Washington State small businesses:

While it can lower taxable income, the real value depends on how your business is structured and whether you meet income and wage thresholds to qualify. Not all businesses are eligible or benefit equally, and in some cases, a C Corp might now be more favorable depending on your goals.

If you’re considering restructuring or unsure how the QBI deduction or other aspects of the OBBB affect your taxes, it’s a good time to consult with a tax professional to model out the best path.

✅ Bottom Line for Washington SMB Owners:

What Should You Do?

1. Consult a CPA – These shifts are complex and a proactive tax advisor can help you save.
2. Update Billing & Bookkeeping – Ensure your systems reflect all new taxes and deductions.
3. Plan Business Entity Structure – Confirm if you’re optimizing for QBI and state-level tax efficiency.

Want to navigate these updates confidently? Huddleston Tax CPAs specializes in supporting Seattle and Washington State small business owners—bookkeepers, consultants, service providers—helping you realign for post-2025 tax compliance and optimization.

The post 7 Tax Law Changes You Need to Know in Seattle in 2025 appeared first on Huddleston Tax CPAs | Accounting Firm In Seattle.

Impact on Small Business Owners in Seattle

1. Increased Business and Occupation (B&O) Taxes

The B&O tax, a gross receipts tax applied regardless of profitability, has seen rate increases ranging from 0.03% to 0.35%, depending on business type and income. Additionally, a new surcharge of 0.5% applies to businesses with taxable income over $250 million, effective until December 31, 2029.

2. Expanded Sales Tax on Services

Senate Bill 5814 broadens the state’s retail sales tax to encompass digital and professional services, including IT services, custom software development, and advertising. Businesses in these sectors must begin collecting sales tax from customers starting October 2025.

3. Potential Cost Pass-Through to Consumers

The increased tax burden may compel small businesses to raise prices for goods and services to maintain profitability, potentially affecting consumer demand and competitiveness.

Considerations for Individuals Relocating to Seattle

Higher Cost of Living

The new tax measures, including increased sales taxes and potential price hikes from businesses, may contribute to a higher cost of living in Seattle. Prospective residents should factor in these expenses when evaluating relocation.

Employment Opportunities

While Seattle remains a hub for major corporations like Microsoft and Amazon, the increased tax burden on businesses may influence hiring practices and salary structures. Job seekers should assess the stability and growth prospects of potential employers in this new fiscal environment.

Strategic Recommendations

For Small Business Owners:

• Financial Planning: Reassess business models to accommodate increased tax liabilities.
• Tax Consultation: Engage with tax professionals to navigate the new tax landscape effectively.
• Operational Efficiency: Explore cost-saving measures and operational efficiencies to mitigate the impact of higher taxes.

For Prospective Residents:

• Budgeting: Develop a comprehensive budget that accounts for the higher cost of living and potential tax implications.
• Employment Research: Investigate the financial health and tax strategies of potential employers.
• Long-Term Planning: Consider the long-term economic outlook of Seattle in light of these tax changes.

While Washington State’s tax reforms aim to address budgetary concerns, they introduce new challenges for small businesses and individuals considering relocation to Seattle. Careful planning and strategic decision-making are essential to navigate this evolving economic landscape.

Photo by Sabine Ojeil on Unsplash

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With global trade policy shifting once again in 2025 and discussions about tariff extensions, pauses, or new rounds of enforcement, now’s a good time to take stock of what these changes could mean for your business and how to plan accordingly.

What Are Tariffs, and Why Do They Matter?

Tariffs are taxes placed on imports (and sometimes exports) from other countries. In the US, tariffs have been used as both an economic strategy and a negotiating tool, particularly in trade relations with countries like China, Mexico, Canada, and in EMEA.

Seattle, as a major port city with a strong international trade presence, is particularly exposed to the effects of tariffs. With the Port of Seattle being one of the busiest on the West Coast and a gateway to the Pacific Rim, changes in trade policy tend to hit home quickly — especially for industries tied to imports, exports, and international supply chains.

Which Seattle-Based Businesses Are Most Affected by Tariffs?

1. Manufacturing and Aerospace Suppliers
   Seattle is known for its aerospace sector — including Boeing and a broad network of manufacturers and parts suppliers. Many of these businesses rely on imported aluminum, steel, electronics, and raw materials. Tariffs on these imports can drive up production costs, affect delivery timelines, or even disrupt contracts.
2. Retailers and Importers
   Small businesses that import goods — including furniture, apparel, electronics, or specialty products — are directly impacted by tariffs on Chinese or European goods. Many local boutiques, online sellers, and wholesale operations are seeing squeezed margins due to added import taxes.
3. Technology and Hardware Startups
   For startups building hardware or relying on components from overseas (such as chips, sensors, or casings), tariffs can significantly increase costs or slow product rollouts. This is especially true for companies sourcing materials from China or Taiwan.
4. Construction and Real Estate Development
   Materials like lumber, aluminum, steel, and manufactured components (like HVAC systems or appliances) often come from outside the US Tariffs on these imports can increase project costs for contractors and developers across the Greater Seattle area.
5. Food & Beverage Industry
   Restaurants, food importers, and grocers that source specialty products from abroad — wines, cheeses, seafood, or spices — may see price increases or delays depending on ongoing tariff regulations. These costs often pass on to consumers.

What Happens If Tariffs Continue (or Resume)?

If the current pause on certain tariffs ends or if additional tariffs are introduced, local businesses may face:

• Higher costs for materials and inventory
• Supply chain disruptions
• Reduced competitiveness in pricing
• Longer lead times for production or fulfillment

For small businesses with tight margins, even a small increase in cost can be significant. Planning early can help you adapt without sacrificing growth.

What If Tariffs Stay Paused?

If tariff pauses are extended, it gives businesses temporary relief — but this shouldn’t be mistaken for permanence. Tariff policy often shifts with election cycles, international negotiations, and geopolitical events. Even if things feel calm now, it’s wise to build long-term resilience.

How to Plan Around Tariff Uncertainty

Here are some strategies Seattle business owners can use to manage potential tariff impact:

1. Diversify Your Supply Chain
Relying on a single country for materials or products is risky. Explore alternative suppliers in non-tariff regions or consider near-shoring (working with partners in Mexico or Canada).

2. Revisit Pricing Strategies
If your costs go up due to tariffs, evaluate your pricing models. Can you pass on some costs to consumers? Is bundling or subscription pricing a solution?

3. Bulk Up Inventory Strategically
If you anticipate price increases, purchasing key goods or materials ahead of tariff changes can help you lock in lower rates and minimize short-term disruptions.

4. Stay Connected with Trade News
Follow developments from the Office of the US Trade Representative (USTR), the Port of Seattle, and industry-specific trade groups. Being informed gives you time to act, rather than react.

5. Work with a CPA or Business Advisor
Tax professionals like those at Huddleston Tax CPAs can help you evaluate how tariffs are impacting your bottom line, identify tax strategies to offset rising costs, and adjust your forecasting models accordingly.

Final Thoughts

Whether tariffs are active, paused, or pending, one thing is clear: Seattle businesses that engage with global supply chains need a plan. Tariffs can feel like far-off policy decisions — until they hit your profit margins.

If your business imports goods, uses foreign-sourced materials, or relies on overseas manufacturing, now is the time to review your strategy and build a buffer against uncertainty. From rethinking sourcing to understanding deductible expenses, Huddleston Tax CPAs is here to help.

Image by Anne Schumberg from Pixabay

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What is the ITEP Tax Inequality Index?

The ITEP Tax Inequality Index is a tool developed to evaluate how state and local tax systems affect income inequality. The index measures whether state and local taxes help reduce the gap between high- and low-income earners or exacerbate it. A regressive tax system, like Washington’s, disproportionately impacts lower-income households, forcing them to pay a larger share of their income compared to wealthier residents.

Washington’s #2 Ranking on the ITEP Index

Washington consistently ranks near the top of ITEP’s list for tax inequality, trailing only behind Florida as the most regressive state. According to ITEP, income disparities in Washington grow after state and local taxes are collected, rather than narrowing. This is due to the state’s heavy reliance on consumption-based taxes and its lack of a progressive income tax.

The Drivers of Washington’s Tax Inequality

1. No State Income Tax

Washington is one of nine states that does not impose a state income tax. While this is marketed as a benefit, it eliminates a progressive tool that could balance the tax burden. In states with income taxes, wealthier individuals contribute a larger share of their income, helping to fund public services more equitably.

2. Heavy Reliance on Sales Tax

Washington depends heavily on sales and excise taxes to fund its budget. The statewide sales tax is among the highest in the nation, and when combined with local sales taxes, it often exceeds 10% in many areas. This system hits low- and middle-income households hardest because they spend a higher percentage of their income on taxable goods and services.

3. Property Tax Inequities

While Washington has property taxes, they are not structured in a way that adequately addresses the wealth gap. For homeowners with high-value properties or for large commercial entities, property tax burdens often don’t scale proportionally with income or wealth.

4. Excise Taxes on Essentials

Excise taxes on items like gasoline, alcohol, and tobacco disproportionately impact lower-income residents. These taxes are flat fees, meaning they take a larger percentage of income from those earning less.

Why the “No Income Tax” Benefit Is Moot

Although Washington’s lack of an income tax is often promoted as a business-friendly feature and a draw for affluent individuals, the reality is more nuanced:

1. Higher Overall Tax Burden for Low-Income Families According to ITEP, the poorest 20% of Washington households pay nearly 17% of their income in state and local taxes. Meanwhile, the wealthiest 1% pay just 3% of their income.
2. Limited Funding for Public Services A tax system reliant on sales and excise taxes is less stable than one with a broad-based income tax. During economic downturns, consumer spending decreases, leading to revenue shortfalls and cuts to essential services.
3. Hidden Costs The lack of income tax forces the state to find revenue in other ways, such as increased fees for services, tolls, and higher business taxes, which often get passed down to consumers.

Potential Benefits of Reforming Washington’s Tax System

While Washington’s current system favors the wealthiest, adopting more progressive tax policies could help address inequality and provide sustainable funding for public needs, such as:

• Reducing the Sales Tax Burden: Lowering the sales tax rate or exempting essential goods (like groceries and healthcare) could alleviate the pressure on low-income households.
• Implementing a Capital Gains Tax: This would target wealth generated from investments, ensuring that the richest residents contribute more without taxing wages.
• Adopting an Income Tax: Even a modest, progressive income tax could reduce the regressive nature of the system and help stabilize funding for education, healthcare, and infrastructure.

Conclusion

Washington’s ranking on the ITEP Tax Inequality Index highlights the disparities embedded in its tax structure. While the absence of an income tax might seem appealing, the state’s reliance on sales and excise taxes places an undue burden on those least able to afford it. For Washington to move toward a fairer tax system, lawmakers must consider bold reforms that balance the scales and ensure that everyone contributes their fair share.

Image by Don White from Pixabay

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Here’s a closer look at what these potential changes mean for Seattle businesses and residents.

The State’s Budget Challenge

The shortfall is driven by a mix of rising costs and lagging revenues. Inflation, increased labor expenses, and higher demand for social services such as child care and education programs have outpaced their funding. Compounding this is Washington’s regressive tax system, which relies heavily on sales taxes that disproportionately burden lower-income residents.

Senator Noel Frame, vice chair of the Finance Committee, highlights the impact of these essential programs: “Caseloads are up because it turns out that when you pass essential services that people need and demand, people use them.”

To prevent severe budget cuts, the Legislature must explore new revenue streams.

The Proposed Employer Payroll Tax

A key proposal is a statewide employer payroll tax targeting businesses with high-salaried workforces. The plan is inspired by Seattle’s JumpStart tax, which has successfully generated revenue for housing, homelessness prevention, and city services.

How It Works

• Employers would pay a 6.2% tax on salaries exceeding the Social Security tax threshold, which is $176,100 for 2025.
• The tax would apply only to businesses with $8 million or more in payroll within Washington state.
• Estimated revenue: $3.8 billion annually by 2029, with alternate structures potentially raising even more.

This tax effectively closes a loophole in the federal Social Security system, where earnings above the taxable threshold are exempt from Social Security taxes.

Seattle’s JumpStart Tax: Interaction and Implications

One critical question is how a statewide payroll tax would interact with Seattle’s existing JumpStart tax. Several scenarios are being discussed:

• Stacked Taxation: Both state and local taxes would apply without adjustments, effectively doubling the tax burden for Seattle employers.
• Tax Credit: Employers could receive a credit against the state tax for amounts paid under JumpStart. This approach could be full or partial, balancing state revenue needs with business considerations.
• Preemption: The state could prohibit local payroll taxes altogether, effectively overriding JumpStart.

Preemption is a contentious issue. Progressive advocates argue for maintaining local tax authority to address specific community needs, while business groups may push for uniform state regulations to limit tax complexity.

Other Revenue Options on the Table

In addition to the payroll tax, lawmakers are exploring several other progressive revenue measures:

• Wealth Tax: Targeting the state’s wealthiest individuals.
• B&O Tax Surcharge: Increasing taxes on the largest corporations.
• Closing Sales Tax Exemptions: Extending the sales tax to personal and professional services, potentially generating billions in new revenue.

These measures aim to address Washington’s regressive tax system, which disproportionately impacts lower-income residents.

The Bigger Picture: A Path Toward Equity

Advocates see this legislative session as a pivotal moment to reform Washington’s tax code. By shifting more of the tax burden onto wealthy individuals and large corporations, the state can reduce reliance on regressive taxes and ensure sustainable funding for critical services.

“This is about creating an economy that works for everyone, not just the wealthy few,” says Alexis Mansanarez of the Economic Opportunity Institute. (Katie Wilson: The Urbanist)

What’s Next?

As the 2025 legislative session unfolds, businesses, residents, and advocates will need to stay informed and engaged. The outcome of these tax debates will shape the future of Washington’s economy and the services that communities rely on.

For Seattle businesses, understanding how these changes might interact with existing taxes like JumpStart will be crucial. While some may see increased tax obligations, others could benefit from a more equitable and sustainable state revenue system.

Stay tuned as lawmakers navigate this “gigantic puzzle” of balancing new revenues with budgetary needs. Whatever the final mix, one thing is clear: action is necessary to close the budget gap and build a stronger, fairer future for Washington state.

Image by Abhay Bharadwaj from Pixabay

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Interest in starting small businesses is rising across Washington state. In 2022, 25% more business applications were filed than in 2019, according to the U.S. Chamber of Commerce — with King County specifically having had the most applications (at over 33,200). All of which begs the question…

What’s led to the increase in business filings in Seattle?

Here are some of the ways in which 2023 is different from 2022 for small businesses in Seattle:

• The economy is recovering from COVID-19: 
  This is leading to an increase in demand for goods and services, which is good for small businesses. In addition, inflation is higher in 2023 than 2022 meaning the cost of goods and supplies are more expensive, so any assistance from government programs — or state-specific benefits (such as no income tax — has been fostering growth.
• The city is investing in small businesses
  The city of Seattle has a number of programs and initiatives in place to support small businesses, such as the Small Business Stabilization Fund and the Tenant Improvement Fund.
• The city is becoming more diverse
  As the population grows, Seattle’s diversity has as well, which is good for small businesses that cater to a diverse clientele.

Here are some specific examples of how the city of Seattle is supporting small businesses in 2023:

• The Small Business Stabilization Fund provides grants to small businesses that have been impacted by the pandemic. These grants can be used for a variety of purposes, such as covering payroll costs, rent payments, and utility bills.
• The Tenant Improvement Fund provides grants to small businesses that are looking to improve their storefronts or make other physical improvements to their businesses. These grants can be used to cover a variety of costs, such as construction costs, permits, and design fees.
• The city is also investing in programs and initiatives that are designed to help small businesses succeed. These programs include the Seattle Small Business Development Center, which provides free and confidential business consulting services to small businesses, and the Seattle Office of Economic Development, which provides a variety of resources and support services to small businesses.

Overall, the city of Seattle is committed to supporting small businesses. This is evident in the number of programs and initiatives that the city has in place to help small businesses succeed. Nowhere is this more evident than with the recent growth in U-District.

The $5 Million Investment in Seattle’s U-District

In 2023, the U District Partnership and the Washington State Department of Commerce invested $5 million in these small businesses. This investment is helping businesses make improvements to their storefronts, purchase equipment, and create outdoor dining areas.

The investment is also helping to create a more vibrant and welcoming community. The new storefronts and outdoor dining areas are making the U District a more attractive place to live, work, and visit. The investment is also having a positive impact on the local economy. The businesses that are receiving the grants are able to create more jobs and generate more revenue.

The U District is a thriving community, and the investment in small businesses is helping to ensure that it continues to thrive for many years to come.

Here are some specific examples of how the investment is helping small businesses in the U District:

• Sweet Alchemy, a coffee shop, was able to add an awning, doubling its coffee business.
• Over 20 businesses have used the grant funding to create outdoor dining areas, increasing seating capacity by over 450 seats.
• The U District Partnership hosted its Third Annual U District Food Walk to showcase the new storefront improvements.

The investment in small businesses in the U District is a smart and strategic investment. It is helping to create a more vibrant, welcoming, and economically prosperous community.

Photo by Sam Battaglieri on Unsplash

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How Does This Impact Real Estate Professionals?

The proposed 2% tax on capital gains exceeding $250,000 is modeled after the state-level capital gains tax, which has already been upheld by the Washington Supreme Court. While this tax is designed to target high-income individuals, it has the potential to ripple through the real estate market in several ways:

1. Real Estate Investors:

• Increased Tax Burden: Investors who sell properties for significant profits will face an additional 2% tax on those gains. This could reduce their net returns and potentially dampen investment activity in Seattle’s real estate market.
• Potential Shift in Investment Strategies: Some investors may reconsider their strategies, such as holding properties longer to defer capital gains or shifting their focus to markets with lower tax burdens.

2. Realtors and Brokers:

• Potential Impact on Market Activity: If the tax discourages investment and sales, it could lead to a slowdown in the real estate market, which in turn could affect realtors’ commissions and business opportunities.

The Broader Context: Addressing Seattle’s Economic Challenges

It’s important to note that the proposed tax is part of a larger effort to address Seattle’s pressing social and economic challenges. The city faces a significant housing affordability crisis, with many residents struggling to find affordable housing. By generating additional revenue, the capital gains tax could help fund critical programs that support low-income individuals and families.

However, the potential economic consequences of the tax cannot be ignored. While it may provide short-term relief for the city’s budget, it could also have long-term implications for the real estate market and overall economic growth.

As the City Council debates this proposal, it’s crucial to weigh the potential benefits against the potential costs. A well-designed tax policy should balance the need for revenue with the goal of maintaining a vibrant and prosperous economy.

Conclusion

Seattle’s proposed capital gains tax is a significant development that will have far-reaching implications for real estate professionals and the broader community. By understanding the potential impact of this tax, real estate investors and brokers can make informed decisions and adapt their strategies accordingly.

Photo by Ev on Unsplash

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Financial Implications

The proposed levy would nearly double the annual property tax rate for Seattle residents. The additional tax would amount to approximately 65 cents per $1,000 of assessed property value. For a property assessed at the median value of $804,000, this translates to an annual cost of $528, a significant increase from the current $276.

This may not seem like much upfront, but there’s a number of implications with rising rates like this. The two main ones are some people are finding it increasingly challenging to afford their owns and every dollar counts. Increasing may not seem like much annually, but if you’re living paycheck to paycheck, it can be challenging. What’s more, if it becomes so challenging you want to sell your home, some prospective buyers may see the higher rate and pass, putting people in a potential “damned if you do, damned if you don’t.”

Allocation of Funds

If approved, the $1.55 billion levy will be distributed over eight years as follows:

• Street maintenance and modernization: $403 million
• Bridge infrastructure and safety: $221 million
• Pedestrian safety: $193 million
• Vision Zero and school/neighborhood safety: $160.5 million
• Transit corridor and connection improvements: $151 million
• Bicycle safety: $133.5 million
• Traffic signal installation and maintenance: $100 million
• Climate change mitigation and environmental protection: $69 million
• Public space activation: $66.5 million
• Freight transportation system improvements: $45 million
• Governance, oversight, and property tax relief education: $7.5 million

Arguments in Favor of the Levy

Supporters of the levy argue that it will enhance safety, reduce congestion, and improve overall connectivity within the city. They highlight the focus on critical safety and accessibility projects, such as repaving heavily used corridors, repairing aging bridges, and constructing new sidewalks. Additionally, supporters emphasize the inclusion of an independent oversight body to ensure accountability.

Arguments Against the Levy

Opponents of the levy contend that it is too expensive and places an undue burden on middle-class residents. They express concerns about the potential for landlords to pass on the increased tax costs to tenants through higher rents. Furthermore, opponents argue that the levy is ineffective and allocates funds to unnecessary projects, such as bike lanes that negatively impact small businesses. They advocate for a “no” vote and urge city leaders to reconsider the proposal.

Ultimately, if you have an opinion, the best way to voice it is to get out and vote.

Photo by Katie Harp on Unsplash

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