Huge Corporations Oppose Making The Country’s Most Regressive Tax System More Equitable

This November, residents of Washington state will have two tax-related ballot questions before them. One — Initiative 1053 — would re-introduce a crippling super-majority requirement for the state legislature to raise taxes. California has already provided ample evidence that such a step leads to budget gridlock.

A second question on the ballot, however, is more worthwhile. Intitative 1098 would create an income tax for Washington’s wealthiest residents, applying a 5 percent tax rate on incomes exceeding $200,000 for individuals and $400,000 for couples, and a 9 percent tax rate on incomes above $500,000 for individuals and $1 million for couples. The money raised from the tax would go to fund K-12 education and health care services in the state, and would also allow for a reduction in property taxes and small business taxes.

The attempt to implement an income tax in a state that currently doesn’t have one has led to quite the uproar from corporations in the state, led by behemoths Microsoft, Boeing and Amazon. Microsoft Corp. co founder Paul Allen has given $100,000 to the opposition campaign against 1098. (On the opposing side, Allen’s co-founder, billionaire Bill Gates, and Gates’ father, Bill Gates Sr., both support 1098).

These huge corporations argue that instituting an income tax on the wealthiest Washington residents will drive business out of the state and make it harder to recruit workers. But only the richest three percent of the state’s residents would be affected. And at the moment, Washington state has one of the nation’s most regressive tax systems, due to its heavy reliance on sales taxes.

Currently, a resident in the poorest 20 percent of Washington residents can expect to pay a whopping 17.3 percent of his or her income in state and local taxes. A person in the next 20 percent can expect to pay 12.7 percent. A resident in the richest one percent of the state’s population, however, will pay just 2.9 percent. There is no other state in the country that places such a large burden on its poorest households.

Nicolas Hanauer, a partner at the venture-capital firm Second Avenue Partners, is for the change (and raising his own taxes), saying “nothing bad will happen to you as a consequence of me paying three, four million more in taxes.” “I won’t cut back on the number of homes I own,” he added. “I probably won’t even cut back on the number of hours I fly in my very own private airplane.”

Big Businesses and their Washington allies tend to resort to the same arguments when it comes to raising taxes on the wealthy, though their fears of blunted economic growth have historically failed to materialize. There’s no reason for Washington to continue to place such a heavy burden on its poorest residents, particularly when money raised from taxing the wealthy can be plowed back into the education system.

To that end, Gov. Chris Gregoire (D-WA) has challenged the mega-corporations opposing 1098 to explain how they expect the state to create a world-class workforce without funding its school. “That’s their workforce of tomorrow,” she said. “I ask them, ‘If not this, then what?'”