Rich guys split on income tax

I-1098 Debate: 'Nothing bad will happen,' says one side; 'Legislature is not afraid to increase taxes,' says the other

October 12, 2010 

Rich guys split on income tax

Former U.S. Sen. Slade Gorton, left, and Bill Gates Sr. enjoy a light moment Monday before their debate over Initiative 1098 at the University of Washington Tacoma. I-1098 would implement an income tax on the state's highest earners.


Some wealthy men debated Monday over whether the rich should give state government more money.

Tax us, Bill Gates Sr. and Nick Hanauer said.

“Nothing bad will happen to you as a consequence of me paying a couple, three, four million more in tax,” said Hanauer, a venture capitalist. “I won’t cut back on the number of homes I own. I won’t cut back on the number of investments I make. I probably won’t even cut back on the number of hours I fly in my very own airplane.”

Gates, father of the Microsoft co-founder, and Hanauer are among the biggest contributors to the campaign for Initiative 1098, which asks voters to set up a tax on high earners that would be Washington’s first income tax. The measure would lower property taxes and business taxes if it passes Nov. 2, but still raise more than $2 billion a year after 2012 that would go to state education and health care programs.

Former U.S. Sen. Slade Gorton and venture capitalist Matt McIlwain, who are working to defeat I-1098, sat next to the pair at the debate that drew enough interest to bring nearly 300 people, and television cameras from CBS’ “60 Minutes,” to the University of Washington Tacoma.

The tax would affect only high incomes, but the two sides sparred over whether the state Legislature would change the measure, as it can do as early as two years after an initiative passes, to expand the tax to everyone.

“The Legislature is not afraid to increase taxes,” Gorton said. “When they’re given this, it’ll be a bonanza the likes of which they have never seen, and they will go wild.”

Supporters of I-1098 say Washington has the nation’s most regressive tax code, citing research by the Institute on Taxation and Economic Policy that says the poorest 20 percent of nonelderly people in the state pay 17 percent of their income in taxes and the top 1 percent pay just 2.6 percent of their income.

Opponents, while refusing to concede taxes here are regressive, note that I-1098 would do nothing to reduce one of the most regressive taxes, the sales tax. Washington’s sales tax is among the nation’s highest.

Opponents focused on the benefits of being one of seven states with no income tax, saying states that have added an income tax have suffered economically. They said Washington would lose a competitive edge in drawing entrepreneurs.

If that were true, Hanauer said, “All of the movie stars in Hollywood would have moved from Beverly Hills to Madison Park.” Instead, he said, “Wall Street continues to be in New York, where there’s a high income tax. Silicon Valley continues to be in California, where there’s a high income tax.”

Supporters of I-1098 have collected $6 million, including $500,000 from Gates, $250,000 from Hanauer, $1 million from the public workers’ Service Employees International Union, and $750,000 from the National Education Association, a teachers union.

Contributors have given $4.6 million to the campaign to defeat I-1098, including $100,000 each from Russell Investments, Amazon chief executive Jeff Bezos, former Seattle SuperSonics owner Barry Ackerley and Microsoft chief executive Steve Ballmer.

Under I-1098, single people would pay a tax of 5 percent on income after their first $200,000, and a tax of 9 percent after $500,000.

Married couples would pay a 5 percent tax on income they earn in excess of $400,000, and a 9 percent tax on income greater than $1 million.

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