Washingtonians Who Get It
Voters in Washington trounced the initiative sponsored by Bill Gates Sr. and public unions to introduce the state's first income tax.
What was especially interesting about I-1098 is that it would have applied only to "wealthy" Washingtonians. The rate would have been 5% on individuals with incomes above $200,000 and couples over $400,000 (rising to 9% at $500,000/$1 million). The zero personal tax rate would have remained for everyone else. "Only the wealthiest 1.2% will pay more," Mr . Gates said. This is an echo of the argument made in the other Washington on behalf of letting the Bush tax rates expire "only on millionaires and billionaires."
Mr. Gates and labor unions spent some $4 million on the proposal. Mr. Gates argued that the state's reliance on the sales tax burdened the poor and that taxing the state's wealthiest was a matter of fairness. It was widely noted that his opposition included Microsoft CEO Steve Ballmer, who with others said it would kill one of the state's biggest economic advantages.
The initiative lost overwhelmingly, by a vote of 65% to 35%, leaving Washington as one of nine states without an income tax. Not stopping there, Washington voters also approved an initiative requiring either a two-thirds supermajority vote of the legislature or voter approval to raise taxes.
So what's the matter with Washington? Clearly, its middle-class residents understand an economic reality that eludes Mr. Gates and many other already-rich advocates of higher taxes: The absence of an income tax has been Washington's greatest comparative advantage over its high-income tax neighbors in California and Oregon. Texas Governor Rick Perry even sent a letter to Washington state's biggest employers, inviting them to move to no-income-tax Texas.
The larger message, which also eludes the nation's leading proponent of soak-the-rich tax ideas—the fellow in the Oval Office—is that the average person simply doesn't believe that the taxers will stop with the wealthy. To protect both themselves and the greater economy outside their windows, voters prefer a tax system whose rates aren't rising—on anyone.
Comment: That's it exactly - taxers won't stop with the wealthy!