At Microsoft, Two Views on a New Tax

In Washington State, high-income residents and corporations are coming together to battle I-1098, a ballot initiative that would levy a 5 percent tax on “income above $400,000 per couple and a 9% levy on income above $1 million per couple.” Microsoft, in particular, has come out strongly against the initiative: Steve Ballmer is the biggest contributor to Defeat 1098 and the company itself has donated $75,000 to the effort. The Gates family, meanwhile, is on a different page. Bill Gates supports I-1098 (but hasn’t donated any money to the campaign), while Bill Gates Sr. has donated $600,000 to the Yes-on-1098 campaign. [%comments]


Ian Callum

If passed, this proposal could provide data on the effect of progressive taxation. Will the state collect more taxes? Or will wealthy people and businesses head for the border?

MRB

Nice to see each party putting their money where their mouth is. No one wants to pay more tax, but I hope that people over the $400,000 range can see that the state is suffering and that their sacrifice won't affect them as severely as taxing the lower earners

Chad

While this *will* add data on the effect of progressive taxation, there is already plenty. And that data shows very clearly that the wealthy will head for the border. (So the cost of the "information" would be enormous.) This WSJ opinion article has it exactly right:

http://online.wsj.com/article/SB10001424052748703882404575520241519315372.html

A quote from:
"In the past decade, the nine states with the highest personal income tax rates have seen gross state product increase by 59.8%, personal income grow by 51%, and population increase by 6.1%. The nine states with no personal income tax have seen gross state product increase by 86.3%, personal income grow by 64.1%, and population increase by 15.5%." Obviously there are a lot of factors affecting these numbers, but the counter-effect of creating this tax is very well explained.

This is a second article on the same subject:
http://online.wsj.com/article/SB10001424052748704901104575423712885940580.html which also raises serious state-constitutional issues with the tax.

When will people understand incentives as they relate to taxes? If the goal is to maximize revenue, it turns out increasing rates often makes the rich pay less. Why the people wanting the rich to pay more don't use that to their advantage is beyond me; must be that mix of politics and simplistic views that often screws things up.

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Ray

Perhaps rather than raising taxes we should be talking about cutting government? We all know that any increase in tax revenues will go to feed the beast; why feed it?

kevin

Ray has it exactly right. More taxes just leads to bigger government. Who really believes that government spends captial more effectively than the pritate sector?

Eric M. Jones

@5--kevin: " Who really believes that government spends captial more effectively than the pritate sector?"

Kevin,

I think you mean PIRATE sector.

Dr J

It is clear the private sector is much better at allocating capital than government - we must give the wealthiest individuals and corporations more tax breaks to countinue our econnomic prosperity. If not our brilliant corporate chieftons - will leave this country... Obviously prime examples of private industry masterfully allocating capital include our banking industry (bear, citi, goldman etc..), the energy industry (Enron, Exxon, BP, coal), our auto industry, our insurance industry, and our healthcare industry - you can tell all these industries are successful by how much they pay their executives...

Evan

Pay for the upper percentage of the population is way out of wack with general inflation. The rich already hide their income in off-shore accounts to avoid taxes. This bill, though well intentioned, will only reward the cheaters more and further punish the honest (all taxes do). And yes, there are some honest rich people. Unfortunately the only way to improve the world is for the wealthy to be less greedy and to spread the wealth better. The more people that have an income the more products they can purchase. This is what stimulates growth, job cuts only further the problem. What we need is an attitude shift in the world. One that focus on people making a difference to humanity and not which celebrity is in rehab this week. We are all the problem. Since most of humanity doesn't want to deal with reality we prefer fairy tales that distract us from the insanity that surrounds us (debt, homelessness, disease, poverty, malnutrition, and so on...). We can fix the world we just need to care about something more then getting ahead of neighbors.

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Drill-Baby-Drill Drill Team

I have a tax proposal that will generate millions and satisfy Steve Ballmer, Bill Gates Jr, and Bill Gates Sr.

It is the Bill Gates Tax. IF your name is Bill Gates, and you are a citizen of Washington State, then YOUR tax rate goes up to 50% of income. It would affect both Jr and Sr and probably a handful of other near-do-well Bill Gate's, but leave the other citizens unscathed. And raise millions!

Sardo

No one is stopping Bill Gates Sr. from paying as much extra tax as he wishes. Why didn't he simply donate that $600,000 to the State?

Christopher

For the State of Washington, this tax will generate money in the short term, but result in net loss in the long term and a slower economy for the entire state. The people who decide where to move corporate headquarters, set up industry and generally add to the jobs market mostly make over $400,000. Why would these people continue to choose to bring their businesses and jobs to Washington state when they are singled out as individuals for higher taxes.

People forget that we actually need the wealthy in order for the middle class and blue collar worker forces to thrive.

pablo

People around here seem to think that the ability to move income around between various jurisdictions is a good and permanent thing. And also to be rather venal.

Dan

@11: We certainly have the wealthy, and they've done extremely well over the past decade in terms of both real income and share of overall national income.

But I guess I've missed the part where the middle class and blue collar workers have "thrived" over the same time period. Can you provide some evidence?

Aleks

@Chad and others: California's top personal income tax rate is 9.3%. It applies to all income over $44,000 (approx). So how come California is home to Adobe, AMD, Agilent, Apple, Cisco, eBay, Google, HP, Intel, Intuit, Juniper, NetApp, Nvidia, Oracle, SanDisk, Symantec, and Yahoo? And that's just a small sampling of the Fortune 1000 companies headquartered in Silicon Valley.

I work at Microsoft, and a number of my friends from college work at tech companies here or in Silicon Valley. I can definitively say that not one of us made the decision of where to work based on Washington's lack of income tax. (Yes, I voted for I-1098, even though it will probably affect me at some point in my lifetime.)

I know it's hard for the "government is evil" crowd to understand, but people choose where to live based on factors other than tax rates. The mere fact that real estate is more expensive in San Francisco than in Oklahoma City should tell you that some people are willing to pay more to live in more desirable places.

Oh, by the way: I-1098 would have reduced the "Business and Occupation" (B&O) tax. Businesses are a lot more mobile than individuals (for obvious reasons), and so this initiative might actually have made Washington a more "business-friendly" state. Alas, it didn't pass, so we may never know.

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