New proposal would replace Seattle’s water tax with expanded tax on capital gains

A new proposal from Seattle Councilmember Alex Pedersen would expand Washington’s capital gains tax to replace what he calls a “regressive water tax.”

Currently, Seattle residents pay a 15.54% tax on their water bills, which goes directly into Seattle’s general fund. By getting rid of that tax, he estimates that the average household will save “at least $100 a year.”

His plan for replacing that revenue stream would come in the form of a 2% capital gains tax on the sale of assets like stocks and bonds over $250,000, with the exception of retirement savings and real estate sales.

This would be in addition to an existing 7% capital gains tax levied at the state level which was recently upheld by the Supreme Court of Washington State.

Pedersen cites data put out by the Institute for Taxation and Economic Policy (ITEP), which says that Washington has the most regressive taxes of any state in the country.

He also pointed to a survey conducted by the Seattle Chamber of Commerce, where almost 60% of Seattle voters asserted that “their taxes are too high.”

“Everyone knows the people of Seattle have suffered too long from one of the most regressive tax systems in the nation,” he said in a Wednesday news release. “... The top 1% can afford to pay this 2%. Adopting a more fair and progressive capital gains tax would ensure no one has to pay taxes for their drinking water in Seattle, making this the first time City Hall has proactively eliminated a regressive tax.”

This would take effect in 2024 if it’s passed by the end of this year, while the city’s water tax would be eliminated “at the end of 2024.”

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