Bill Gates, Sr., the father of Microsoft billionaire Bill Gates, is trumpeting a new state income tax in Washington for individuals who earn more than $200,000 a year or couples who earn more than $400,000 to benefit the state's public education and health systems.
The initiative, I-1098, would impose a personal income tax of up to nine percent on Washington's highest earners, but cut property and business taxes for small firms and homeowners. Washington is currently one of seven states with no personal income tax and the state has a history of strong public opposition to taxes.
Gates, who donated $600,000 in support of the measure, told reporters in a conference call on Wednesday that the tax would provide a "vital investment" of about $2 billion in Washington's underfunded public schools and health care facilities.
"It's a proposal to reform Washington state's tax code, which is ranked dead last in terms of basic fairness," he said.
Seattle venture capitalist Nick Hanauer, an early investor in Amazon.com and founder of aQuantive, joins Gates in supporting the initiative.
"Bottom line, this is a moral issue about fairness and whether as a society we want to face the need and put our money where our mouth is," he said. "This is not an onerous tax. It is simply a way of getting the lucky citizens in the state to contribute, not in proportion to others, but something to the state that benefits them."
Opponents of 1098, including Microsoft CEO Steve Ballmer and co-founder Paul Allen, have argued that the initiative would drive entrepreneurs out of Seattle and further damage the job market. Economist Arthur Laffer, who became influential under the Reagan Administration, wrote in an Oct. 5 article for the Wall Street Journal that the tax would merely "punish the rich for their success."
"Those states with the highest tax rates, and those states that have introduced state income taxes, have seen standards of living (personal income per capita) substantially underperform compared to their no-tax counterparts," Laffer wrote. "If Mr. Gates Sr. and his son feel so strongly about taxing the rich, they should simply give the state a chunk of their own money and be done with it. Leave the rest of Washington's taxpayers alone."
Mr. Gates countered Laffer's argument by pointing out that despite a tough economy, all of Washington's citizens have a personal stake in the quality of the state's schools.
"Things are in a bad state and people are feeling some pessimism ... it may be in many cases it would influence them to vote 'no,'" he said. "On the other hand, I think the people in this state are anxious to have the best possible public education system, so that would influence them to go ahead and give approval to 1098."
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