SEATTLE — A proposal for a Seattle tax on capital gains fell short Thursday for the second time this week, failing to secure majority support from the City Council.
That means the city won’t enact Councilmember Cathy Moore’s 2% tax on investment-sale profits above $262,000 annually. In rebuffing the proposal, some of her council colleagues said the timing wasn’t right.
The idea could resurface in the coming year and could stand a slightly better chance of passing then, because a council seat will change hands next week when recently elected Alexis Mercedes Rinck replaces Tanya Woo.
“We will continue to have this conversation,” Moore said Thursday, making the case that Seattle will need additional revenue from well-off residents to balance its budget in the long term and to provide struggling residents with a robust social safety net. “It’s a conversation we can’t afford not to have.”
The decision on the capital gains tax came Thursday alongside an 8-1 vote to formally adopt Seattle’s 2025 budget. The council passed a modified version of Mayor Bruce Harrell’s budget plan, agreeing to plug a general-fund deficit and increase spending on priorities like police largely by redirecting a chunk of JumpStart payroll tax revenue previously earmarked for affordable housing.
Council President Sara Nelson backed the new budget, praising her colleagues for working with Harrell to focus on public safety. Councilmember Tammy Morales cast the only vote against it, saying she couldn’t endorse its cuts to jobs and programs, as well as its deficit-closing approach.
The vote against Moore’s capital gains tax was 6-3. The proposal had received a 4-4 vote during a budget committee meeting Tuesday and had advanced to Thursday’s full council meeting with a “do not pass” recommendation.
On Thursday, Moore, Morales and Dan Strauss voted yes. Nelson, Rob Saka, Maritza Rivera and Bob Kettle voted no. So did Joy Hollingsworth, who had voted yes Tuesday, and Woo, who had abstained Tuesday.
Moore introduced her proposal this month after the Nov. 5 election saw Washington voters affirm a similar tax at the state level, rejecting a ballot initiative that sought to repeal it. The state’s tax passed the Legislature in 2021 and took effect last year after surviving a court challenge. It taxes profits from the sale or exchange of stocks, bonds and other investments, excluding retirement accounts and real estate. It initially applied to gains above $250,000 and is calibrated to grow with inflation.
Moore, who represents North Seattle’s District 5, said her city tax would be identical to the state’s version, except with a 2% rate rather than 7%. She made her proposal part of the council’s budget deliberations, saying the revenue could be used to fund rental, homebuyer and food assistance.
In opposition, Woo said a more thorough stakeholder discussion about the proposal was necessary. Nelson said Seattle residents want to see City Hall achieve results with existing revenue before raising and spending more.
“I do think we need to build back public trust,” the council president said.
In support, Morales described the tax as a responsible step to diversify the city’s revenue options. She said the council had an opportunity to show spending restraint this year and instead added to Harrell’s budget.
Morales said she hoped Mercedes Rinck would bring “a different balance” to the council when sworn in. Mercedes Rinck defeated Woo in a special election on Nov. 5 and campaigned as an advocate for progressive revenue.
