Have you heard about the proposed wealth tax in Washington? The state legislators, in an effort to offset the lack of a state income tax and in an effort to reduce inequality, are proposing a 1% tax on wealth over $1 billion. This would raise about $2.5 billion annually in revenue for the state. Additionally, it would only apply to nontangible financial assets like investments, stocks, or options. As you can imagine, the state's mega billionaires would bear the brunt of this and it would fall largely on the backs of four people: Jeff Bezos, MacKenzie Scott, Bill Gates, and Steve Ballmer. A full 97% of the proposed wealth tax would come from those four billionaires.
Jeff Bezos would be on the hook for $2 billion a year, his ex-wife MacKenzie Scott would owe $600,000 a year. Gates would be required to pay $1.3 billion a year. Ballmer would owe $870,000 a year. Of course, none of those four people have day-to-day roles in that they don't need to go into an office so they could feasibly just move to another state to avoid the tax. The tax experts who calculated the $2.5 billion annual tax may be assuming one or more will move, since if you total up what Bezos, Scott, Gates, and Ballmer would be responsible for paying it comes to $4.8 billion, far exceeding that $2.5 billion.
Any one of these four billionaires could move to another state, call it their primary residence, and still spend up to 182 days a year in Washington to avoid the tax. Ballmer, as we all know, owns the NBA's Los Angeles Clippers, and could easily just decide to call Los Angeles his primary home – though real estate in the Golden State doesn't come cheap, he can afford it. Bezos maintains an L.A. home as well. Obviously, all four are rich enough to move to wherever they want and are also rich enough to have advisors around them telling them what the smart and money-saving thing to do is. In other words, Washington state should not count those billions before they have them.
Backers of the wealth tax argue that it is needed to bring fairness to the most unequal tax system in the United States. Washington has no state income tax so its government revenue comes from sales tax, property tax, and other taxes, which means low and middle-income Washington taxpayers pay a larger share of their income in state taxes. According to state representative Noel Frame, who introduced the bill, Washington's lowest-earning residents pay 18% of their income in state taxes. The top 1% of earners pay just 6% of their income in state taxes. Frame believes that by only taxing financial assets, the state avoids the complicated issue of trying to apply a value to and then tax art, real estate, and other assets that can be difficult to value.
While Bezos, Scott, Gates, and Ballmer would definitely bear the brunt of the tax, there are roughly 100 billionaires in Washington who'd be sharing in the tax, according to the Washington Department of Revenue. We're not sure where the Department of Revenue is coming up with that number as according to our estimate, there are just 12 billionaires in the state of Washington. Representative Frame also doesn't believe billionaires like Bezos and Ballmer will just up and leave the state because of the tax.
Frame may not be taking into effect how the world has changed how we do business during the coronavirus pandemic. Working from home has brought about ways to do things differently and people do not have to be in the office to take part in meetings or be productive. This makes it easier for these billionaires to just decide to leave Washington and its proposed wealth tax if it suits them. People have flexibility with their jobs and commitments that we did not have a year ago, and what actually happens if this wealth tax is imposed may surprise lawmakers.