Voters approve Prop. 2, giving small Seattle businesses a tax break

A sizable shift in how Seattle’s business taxes will operate is coming after the expected passage of Proposition 2.

Seattle’s Prop. 2 Business & Occupation tax passed with 67.8% voting in favor, compared to 32.2% voting against.

Approximately 90% of Seattle businesses, all small in size and stature, would pay lower taxes under this proposition. However, for companies with annual gross revenues exceeding $5.7 million, taxes are expected to increase. Companies producing that level of revenue make up approximately 10% of businesses in Seattle.

“Trump-era cuts threaten the funding Seattle relies on for housing, public health, and safety,” supporters of Prop 2 stated on its website. “Without local action, critical programs could be slashed, worsening the homelessness and overdose crises. Revenue from the Seattle Shield Prop 2 update on B&O tax would support the City’s General Fund to sustain essential services.”

The City of Seattle estimated that this proposition could generate an additional $80 million annually for the city.

Mayor Bruce Harrell and Councilmember Alexis Mercedes Rinck, both of whom are on the ballot seeking reelection, proposed the measure to the Seattle City Council in August. After a vote, it made its way onto the November ballot.

Critics of Proposition 2 claimed high-grossing businesses with low profit margins, like a grocery store, would be negatively impacted by this change.

“Seattle’s tax system differs from that of many other U.S. cities. Seattle businesses contribute a significantly higher percentage of the Seattle city government’s costs compared to businesses in other cities,” Eugene Wasserman,  president of the North Seattle Industrial Association, stated. “To continue this bargain for Seattle residents, Seattle’s existing businesses must grow, and new companies must move in. Maintaining healthy business growth across small, medium, and large businesses is essential. While Prop 2 provides a tax break to small companies, it more than doubles the tax burden for medium and large companies.”

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