Seattle taps JumpStart tax to fill budget shortfall
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Seattle City Council approved an $8.5 billion 2025-2026 budget, using JumpStart payroll tax funds to fill a multi-million dollar gap in the general fund.
Why it matters: The reallocation of the controversial payroll tax, which is meant to fund affordable housing, homelessness services, equitable economic development, and climate initiatives, is the largest diversion of those funds since the tax was implemented.
Driving the news: The budget, passed 8-1 Thursday, redirects $287 million in 2025 and $223 million in 2026 from the tax's intended uses to cover general fund needs, per The Center Square.
- The council also removed spending restrictions, making it easier to continue reallocating the JumpStart tax in the future.
The other side: Councilmember Tammy Morales voted against the budget, criticizing the 8% increase in spending next year as reckless given the forecasted $80 million deficit within two years, per the Puget Sound Business Journal.
- A coalition of 22 organizations also opposed using JumpStart funds for the general fund, arguing it betrays the tax's intended purpose, KIRO 7 reports.
The big picture: JumpStart taxes large businesses with highly paid employees, targeting tech industry giants like Amazon.
- Despite what it was designed to fund, revenue from the payroll tax has been used to support general fund expenses every year since it began generating revenue in 2021, per GeekWire.
- The shift has drawn criticism from housing leaders who say straying from the tax's original purpose undermines the foundations of the city's affordable housing initiatives.
By the numbers: When JumpStart passed in 2020, it was projected to generate $219 million annually. By 2025, its revenue is expected to reach $430 million, according to KIRO 7.
- This year, JumpStart applied to businesses with local annual payrolls of $8.5 million or more and that employ at least one person making more than about $182,000.
Zoom in: The budget includes the city's largest-ever investment in affordable housing, totaling over $340 million — five times what the city spent annually pre-pandemic, per the City Council.
The big picture: While the budget avoids some of the deepest program cuts Mayor Harrell proposed earlier in the year, it reduces funding for tenant hotlines and legal aid, the Seattle Times reports.
- Advocates warned these changes could harm renters as high housing costs continue to burden Seattle residents.
What we're watching: A proposal for a citywide capital gains tax to support the budget failed in committee Tuesday, but could return in future discussions.