After the pandemic, Seattle has experienced a noticeable decline in its former appeal. More than a third of downtown office buildings are vacant, while companies are moving some operations to nearby Bellevue and other cities, including Nashville, where the tax and regulatory environment is seen as more favorable. City officials are also facing criticism over tax policy, public-safety problems and strained relations with business.
A 129-page report released by Mayor Katie Wilson warns that Seattle’s heavy reliance on the technology sector could have serious consequences. Artificial intelligence and other changes are already transforming the tech labor market, while a potential loss of workers, companies and professional expertise would be extremely difficult to offset.
The concentration of tax revenue is a particular concern. About three-quarters of the JumpStart tax, which applies to large employers with highly paid employees, is paid by just 10 companies. This city payroll tax applies to businesses with high gross revenue, with the rate determined by average pay: the higher the wages, the greater the tax. The revenue is used in part for affordable housing, homelessness assistance and economic recovery.
The main burden falls on tech giants because they combine high revenues, thousands of highly paid workers and substantial payrolls. As a result, layoffs, the relocation of jobs or weaker financial performance at one or two companies could have a significant impact on the city budget.
In response, Wilson announced measures to diversify the economy. The city plans to create a task force made up of representatives from business, labor unions and other organizations, as well as a strategic initiatives fund to support innovation in fields such as clean energy and advanced manufacturing. The mayor’s office intends to streamline permitting so companies can open and expand more easily. However, the task force’s membership, the size of the fund and its sources of financing have not yet been determined.
The report says Seattle’s economy is 42% more exposed than the national average to risks associated with the adoption of AI. High local taxes could make it even harder to attract employers, professionals and entrepreneurs, particularly amid competition from Bellevue.
Bellevue is located in the same Puget Sound technology region, has well-developed infrastructure, access to skilled workers and is close to Seattle. At the same time, the city has no full equivalent of Seattle’s JumpStart payroll tax. Instead, it relies on the statewide business and occupation, or B&O, tax, while local fees and regulations are viewed in some cases as more moderate and predictable. Bellevue is also actively expanding office and residential construction. Its advantage does not lie in lower costs — real estate and labor remain expensive there — but in the combination of proximity to the talent pool, infrastructure and a more stable business environment.
Amazon offers a telling example: from 2020 to 2024, the company increased its Bellevue workforce by nearly 12,000 employees, while its Seattle headcount fell by roughly 10,000.
The mayor’s initiatives face political tensions. Business groups are calling for lower taxes and improved public safety, while Wilson’s progressive supporters consider tax revenue essential to funding housing and social programs. More than 30 employers, including Costco and Starbucks, have already urged the mayor to take stronger action on safety problems.
Wilson acknowledges that the tax burden can encourage companies to move jobs elsewhere, but she has not yet promised to reduce it. Business representatives will be watching the city budget closely: new or higher taxes could undermine confidence in the economic recovery plan and intensify competition from Bellevue.
Based on: Seattle mayor wants to diversify the city’s tech-dependent economy