In his last several months in office, Council Member Alex Pedersen will do what he does best: trolling his political enemies. Recently, he proposed a dinky capital gains tax, undermining the City’s long study to find new ways to tax the wealthy in the face of the projected 2025 budget deficit. He also proposed transportation impact fees on new development; some progressives like those kinds of fees, but developers and his urbanist critics absolutely loathe them. 

Pedersen said he’s hopeful he can get the bills signed into law before he leaves City Hall at the end of the year, but with the authority of an incoming City report and a legal battle working against him, it looks like Pedersen will accomplish little more than a parting virtue signal to business and to NIMBYs. 

A Capital Gains Tax With No Gains for the City

According to a recent poll conducted by the Seattle Times and Suffolk University, 54% of respondents support a local capital gains tax similar to the state’s version, which imposes a 7% tax on the sale of stocks, bonds, and some other assets above $250,000.

You better believe that Pedersen will be spouting off that poll result in every committee meeting to advocate for his proposed 2% add-on to the state’s tax. However, his proposal differs from the state’s tax in a crucial way: It would not bring the City more revenue, which is something the state’s capital gains tax did exceptionally well.

In a press release, Pedersen bragged that the tax would be “essentially revenue-neutral” because it would raise a projected $50 million to simply replace the regressive water tax.

The water tax arbitrarily charges water consumption at a rate of 15.54%. It is certainly a regressive tax compared to the capital gains tax, which would only affect the richest households. (For reference, the state version only taxed about 5,000 of Washington's 7.7 million residents.) But some argue Pedersen’s proposal serves mostly as a tax break for homeowners who water their lawns. Plus, people who earn lower than 70% of the average median income can already apply for a discount of 60% on their Seattle City Light bill and 50% on their Seattle Public Utilities bill. 

Pedersen is not interested in amendments to hike up the tax rate to replace the regressive tax AND raise money to fund the City’s growing needs. He told The Stranger that maybe a future council will increase the tax rate, but, for now, he said he’s “sensitive” to the opinion of the people–or at least the opinion of people who answered the Seattle Metropolitan Chamber of Commerce’s poll.

Doing the Chamber’s Bidding for Old Times’ Sake

According to a poll conducted by EMC Research in partnership with the Chamber, 57% of Seattle voters believe taxes are “too high for what they are getting” and 73% of voters do not trust the City to spend tax dollars wisely.

It appears Pedersen and the Chamber share a playbook. The Chamber used this same poll in an effort to derail the Progressive Revenue Stabilization Workgroup, which is expected to finally produce a report by the first week of August. Any new tax, whether it's from Pedersen or the task force, needs to be implemented by the end of the year in order to generate funding for the next biennium in 2025. 

By preempting the report, which could recommend its own revenue-generating capital gains tax, he could force a false choice between eliminating a regressive tax and bringing in more money. If the progressives kill his proposal because they would rather use that tax to fill the budget hole or expand programs, then they would be the villain for charging poor people for something as fundamental as water.

However, Pedersen’s bill faces a major obstacle: Progressive Revenue Stabilization Chair Council Member Teresa Mosqueda, who heads the committee to which he referred his proposal. She will decide when her committee hears it, and it doesn’t look like she will let him jump the gun. When asked if she supports Pedersen’s tax, she wrote, “No. We are waiting for the revenue task force to complete its work next month."

Once the council reviews the coming report, they could axe the water tax or any regressive taxes AND generate new revenue. That is, if Mosqueda, a proponent of new revenue, can get more allies than revenue-neutral Pedersen. 

The usual suspects, Council Members Tammy Morales and Kshama Sawant, will probably agree to most progressive revenue streams, given their unpopular vote to increase JumpStart last year. Council Member Lisa Herbold also has a strong record of advocating for new revenue; see for reference her income tax proposal and her initial support for the head tax. 

Council Members Sara Nelson and Debra Juarez often side with Pedersen and may be more difficult for Mosqueda to win over. As usual, the path the council takes will largely rely on which side of the bed Council Members Dan Strauss and Andrew Lewis wake up on. It really could be a toss-up: Strauss told the Seattle Times that he supports seeking new revenue to fill the budget deficit, and Lewis said he’s a “maybe.”

Bringing Back Impact Fees that Cannot Yet “Impact” Seattle

Last year, Pedersen failed to secure $100 million in bonds to address the growing bridge maintenance backlog, so now he’s resurrecting an old council proposal to charge developers a one-time fee on the creation of housing to fund car infrastructure and other transportation needs.

Pedersen said he would set the fee somewhere between $5,000 and $8,000, exempting low-income housing, child care centers, and nonprofit facilities. Central staff projects the proposal could raise $200 million on the low end. He hopes the tax can avoid a steep rise in the expiring Levy to Move Seattle as homeowners see a “tsunami” of property tax hikes in the housing levy and the crisis care center levy.

However, the City cannot move forward with the proposal because a bunch of developers appealed the long-considered fees. Pedersen is a fool if he thinks he can get the job done in his last six months in office, but with a possible urbanist majority taking over the council in 2024, this would be the best time to try. 

Pedersen, Herbold, Sawant, and Morales all support impact fees. With new development comes an increased strain on parks, schools, fire departments, and transportation. The proponents argue that developers, who profit from Seattle’s appeal to renters, should have to shoulder some of those costs.

Hardline urbanists, in general, think impact fees will stifle development by making it more expensive for developers to build much-needed housing. According to the Urbanist, the strong urbanist City Council candidates such as Alex Hudson and Efrain Hudnell in District 3, Ron Davis in District 4, Nilu Jenks and Tye Reed in District 5, and Lewis in District 7, opposed the fees. 

Impact fee opponents probably don’t have much to worry about. The council has floated the proposal for almost a decade to no avail. If he wants to pretend this will pass during his tenure, let him live in his delusion under some bridge, apparently in need of repair, where a troll belongs.Â