[Editor’s Note: This editorial was co-authored with Patrick Ennis]
In the 1990 budget compromise, Senate Majority Leader George Mitchell of Maine, pushed a 10 percent luxury tax through Congress, including that for yachts that cost more than $100,000. Enough Democrats and Republicans agreed that the Robin Hood tax, as it was called, would protect jobs by taxing those who could “most afford” to pay more. For the economy then, as it is now, was struggling. Simple enough it seemed to many at the time.
But a funny thing happened on the way to expanded revenue and saved jobs. Those who could “most afford” it stopped buying yachts – to the tune of a 77 percent drop over the following year. Most profoundly, as the bottom dropped out of yacht sales, an estimated 25,000 blue-collar shipworkers, lost their jobs. Many of these from Senator Mitchell’s home state of Maine – which until then, had a generations long tradition in shipbuilding.
Fast forward 20 years to Washington State Income Tax Initiative 1098 that confronts us today. The public employee unions whose bosses have given more than $4 million to its passage, claim to do so in the name of saving jobs in education and healthcare. According to their own website “Washington’s middle-class families are struggling and the wealthiest need to start paying their share.” This Robin Hood tax is aimed at those most able to afford it. It too will have destructive unintended consequences.
Entrepreneurial capital – the lifeblood of Washington’s vibrant start-up tech community would be under severe pressure to move elsewhere, bleeding jobs to the 46 other states whose tax code would be more welcoming. Washington’s innovation economy is in a constant battle to attract the best and the brightest. Adding to that burden the need to sell prospective employees on the 4th highest personal income tax in the country will cause many to avoid Washington altogether and take their talent elsewhere.
Those targeted by this tax, are also the most able and willing to legally avoid paying it, by moving their businesses and jobs to a state where they can do exactly what they do now, without the added tax burden this act imposes. With a state unemployment rate of 9 percent, why force the hand of Washington job producers in this way?
Oregon understands this first hand having recently passed a similar hike on income taxes on its wealthy, but realizing only half of the expected revenue from it. And The Oregonian just reported that Oregon businesses will be one of the chief beneficiaries of a passed 1098, as it would help them overcome their recently self-imposed competitive disadvantage.
“It’s unquestionably a dramatic change that could have an impact on the business climate in Oregon,” says Bill Ahern, communications and policy director at The Tax Foundation, a non-partisan research center. “When a competitor gives themselves a self-inflicted wound, I guess you just wait and cheer.”
Idaho has a track record of trying to poach Washington companies, especially from the Spokane area so close to its border, and a passed 1098 will further help its effort. And it was just reported that Texas Governor Rick Perry has aggressively reached out to nearly 100 business leaders in our state welcoming their companies to relocate south to his state – one “with no personal income tax now, and no interest in getting one,” he writes. His case is a good one, if 1098 were to pass.
Washington is already a high cost state. Unemployment benefits, taxes for personal injuries at work, and environmental taxes are all high. But all of this has been tolerable because Washingtonians have been foresighted enough to never allow an income tax. Washington state itself promoted the absence of a state income tax in a several page glossy ad that ran recently in Forbes, effectively highlighting this key advantage to business prospects. It has been our companies’ crown jewel in the talent competition in which we are all engaged.
Washington has been blessed by the entrepreneurial genius of Bill Gates, Paul Allen, Bill Boeing, Jeff Bezos, Howard Schultz, and others less well known. But we have no entitlement to these successful leaders, or the hundreds of thousands of jobs they have created for our state and nation. In fact, by poisoning the climate for success that heretofore has led many of our colleagues to settle in this beautiful place, there is every right to worry that the next generation of technology and business success stories will be written elsewhere.
1098 would hurt all Washingtonians for years to come, from the most successful tech companies, right down to the public employees for whom unions are spending millions to get this enacted. Should 1098 pass, there will not be enough people left in the “most able to afford it” category to fund the jobs this act aims to save. So, in two short years, Olympia is sure to expand and extend this tax to us all, as the law allows, further exacerbating Washington’s competitive disadvantage. And no, a vote of the people is not required to expand this tax, as the slick ads for Initiative 1098 falsely claim.
But all of this need not come to pass if we defeat Initiative 1098. Please vote No on Initiative 1098 – for all of Washington. For those “most able to afford it,” yes, but especially for those least able to.