Tax Lawyer's Blog

If Bill Gates daddy gets his way, low tax states like Florida are about to see an influx of rich coffee moguls and grunge rockers.

Paul Caron alerts us to a Weekend Wall Street Journal editorial titled Gates of Confiscation: Look Who Wants to Give Washington State an Income Tax:

The battle between taxpayers and government unions will define the fiscal future of the 50 states, and the newest battlefield is Washington state. That’s where a few rich taxpayers led by Bill Gates Sr. and the Service Employees International Union (SEIU) are bankrolling a November ballot measure to create the state’s first income tax.

And not just a toe-in-the-water tax. They’re diving into the deep end with a proposal that would immediately impose a 5% tax rate on income above $200,000, or $400,000 for married couples. The rate would climb to 9% on single filers making $500,000, or $1 million for couples.

No state has introduced an income tax since Connecticut nearly 20 years ago, and that state’s experience has not been happy. The top rate in Hartford began at 4.5% but has since climbed to 6.5%. Washington wants to leap over that and achieve California and New Jersey heights in one giant step. Washington would move overnight from one of the nine states with no income tax to having the eighth highest rate in the country.

We weren’t in need of additional proof that Junior is smarter than Senior, but here it is anyway:

Mr. Gates, a wealthy lawyer whose son is among the richest men on the planet, is pitching the proposal as a chance for 97% of the voters to pay the state’s bills by socking it to the richest 3%. What he doesn’t say is that Washington’s lack of an income tax is among its main comparative advantages in luring those top 3%, along with their businesses and jobs, into the state.

In addition to Washington, the states without an income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. Combined they had an average 18.2% growth rate in jobs over the past decade, more than twice the 8.4% job growth of the nine states with the highest income tax rates. …

We hope Washington voters aren’t duped by the claim that only the rich will pay this tax. After two years, the law allows the legislature by simple majority to extend the tax to nearly everyone. The revenue from the tax will finance new spending, which will soar and lead to even higher deficits in the next downturn, which will create political pressure to expand the tax to the middle class.

Income taxes are always sold as a one-time way to reduce deficits, but they always become engines of greater spending, and eventually deficits. Just ask Californians. If Mr. Gates wants the rich to finance more Washington spending to create more SEIU dues-paying jobs, he and his son can do so by donating their own fortunes.

Once again, I would like to welcome to Florida all rich, productive folks. We encourage you to relocate your businesses, your jobs, and your money here. We won’t tax you because we know you will do more for our economy untaxed.

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• Michael Caine to Move to America if Brit Tax Rates Goes to 51%
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