Jeff Bezos would owe about $ 2 billion annually in state income taxes under Washington’s proposed wealth tax, according to lawmakers.
Washington state lawmakers are proposing a 1% levy on assets over $ 1 billion as part of an effort to reduce inequality and make up for the state’s lack of income tax. Legislators say the tax would generate approximately $ 2.5 billion in revenue per year and would only apply to so-called non-intangible financial assets or investments such as stocks or options.
However, tax experts say the state’s wealth tax would depend on four megabillionaires who call Washington state home: Bezos, Bill Gates, MacKenzie Scott, and Steve Ballmer.
Jared Walczak of the Tax Foundation wrote that 97% of the tax revenue would come from these four billionaires. Bezos, who is currently valued at around $ 200 billion, would owe about $ 2 billion a year under the new tax. Gates, valued at about $ 135 billion, would owe about $ 1.3 billion, while Ballmer would owe about $ 870 million. Scott, Bezos’ ex-wife, would owe about $ 600 million a year.
With none of the Big Four holding an everyday corporate role in Washington, they could simply move to another state to avoid the tax, critics said. In fact, for their revenue estimate, state tax experts may have assumed that Bezos, who has just stepped down as CEO of Amazon, or one of the others, would leave as the total amount of taxes owed by the four billionaires exceeds the forecast of $ 2.5 billion .
Walczak said any of these people could move to a different state and make it their primary residence and still spend up to 182 days a year in Washington state and avoid the tax.
“This would not only thwart the property tax, but also rob the state of other income,” said Walczak. “These affluent residents still pay a disproportionate share of state and local taxes and contribute significantly to the local economy. Persecuting them would have dire consequences beyond the failure of a new tax.”
Proponents say wealth tax is necessary to bring fairness to the country’s most unequal tax system. Because there is no income tax and it increases state revenues from sales tax, property tax, and other taxes, low- and middle-income taxpayers pay a larger portion of their income in state taxes, they say.
Noel Frame, the state official who introduced the bill, said the low-wage earners pay 18% of their income in state taxes, while the top 1% pay 6% of their income in state taxes.
“We have a tax code that is completely unfair,” said Frame. “I just don’t think that’s acceptable anymore.”
Frame said Washington’s wealth tax by taxing financial assets avoids the problem of trying tax claims like art, real estate, collectibles, and other hard-to-value assets.
While the Big Four would bear the brunt of the tax, the state Treasury Department estimates that there are nearly 100 billionaires in the state who could pay the tax and spread the risk. Forbes estimates Washington has about a dozen billionaires.
Speaking of criticism that the state’s best billionaires could leave, she said that with the exception of Bezos, the rest of Washington’s billionaires are closely linked to him.
“The idea that they will just pick up and go is a cynical view and not backed by evidence,” Frame said, citing studies that said increasing taxes on the rich did not see a greater than expected increase in churn due Millionaires and high earners.
However, a concentrated tax on just a handful of mega billionaires could be different. Orion Hindawi, co-founder and CEO of Tanium, who recently relocated his family and business to Washington from California, said during an interview with the Washington Technology Industry Association that the state would lose its competitiveness if it levied taxes on the rich .
With remote meetings and online productivity, workers and managers are no longer tied to a city or state as they used to be. He said a wealth tax was viewed by his peers as “defamation”.
“The reality is that people in Washington state have flexibility that they didn’t have a year ago, and that is continued flexibility,” Hindawi said. High earners and flexible workers, he said, “are basically nation-states in their own right. They can move where they want, and that’s trivial.”