US: Wealth Tax on Megarich Would Invest in Washington State’s Future

Despite Governor Ferguson’s hemming and hawing, state lawmakers are advancing a wealth tax that could raise billions to fully fund public schools and avert a budget crisis.
President and convicted felon Trump is attempting to impound billions of dollars that Congress has appropriated to states and cities. His order has been stayed. But what he really wants is to take this up to his Supreme Court for them to validate his dictates. What does this mean for Washington? Our state budget in the 2023-2025 biennium was financed with over $45 billion in state taxes and over $26 billion from the federal government.

But Washington State also sent $22.5 billion more into the federal treasury in 2022 than we got back in spending. For every resident in Washington state, we sent $2,289 more to the federal government than we received. So we are a donor to the federal government, and we are subsidizing other states, mostly red, such as Mississippi which received $10,408 more per capita than it contributed to the federal government.

If Trump did pull federal funding from our state, what public services would be compromised? It is hard to forecast, but certainly imperiled are Apple Health, Head Start, the health subsidies for people getting health care through the Health Benefit Exchange, most likely Pell grants for low-income students and federal student loans, free and reduced school lunches, K-12 funding, and the list goes on.

We can’t stop the Supreme Court from validating in whole or in part Trump’s illegal confiscation of funding for the states. In our state, this just adds billions to the $10 billion projected gap in revenues and public services forecast for the next four years. So we have to become more self-sufficient, independent of the feds…

Which means that we need to raise more revenue, and let’s make that progressive revenue. In this context, Governor Inslee’s proposal for a 1% wealth tax makes a lot of sense. This wealth tax will be a levy on individually owned “intangible” assets exceeding $100 million such as stocks, cash and corporate holdings. It would bring in over $10 billion in the next four years, revenue we urgently need for K-12, child care, higher education, and health care. This 1% tax rate is lower than King County’s tax rate on real property. Right now real property, like your house, is taxed, while stocks of the same value are tax-free. And it is the very wealthy who own stock exceeding $100 million. (For data freaks, the Economic Opportunity Institute has an excellent analysis of the proposed wealth tax.)

Governor Bob Ferguson has not embraced this proposal, talking more about government efficiencies. But you can’t make up for $10 billion with staff cuts, especially when the majority of our spending is for education and health care… What are you going to do, diminish the number of students or people who need health care? So we have to look for new revenue, and there is plenty of that in the pockets of our very own uber-wealthy residents.

I worry that Ferguson has been listening to Nick Hanauer. You would think that Hanauer, the megarich progressive purveyor of Pitchfork Economics and funder of Invest in Washington Now’s defense of the capital gains tax, would have strongly endorsed the wealth tax proposal. But he excoriated Inslee’s proposal, not with facts, but with rhetoric and name-calling, labelling the wealth tax “boneheaded” — a Trumpian move indeed.

Hanauer claims that wealthy people will just levitate from their mansions on Lake Washington or in Nick’s own wealthy enclave of the Highlands (conveniently located just north of Seattle to avoid Seattle property taxes) to join their buddies near Mar-a-Lago. He has spoken to a few of them and claims that “every wealthy person I’ve spoken to in the last few days has said they will leave the state.” I doubt that Hanauer has talked to the approximately 3,400 people who would owe a wealth tax, or even 1% of them.

These people probably know how to do their own math, beyond the rhetoric. But let’s go through it. If an uber-wealthy person’s intangible assets add up to $1.025 billion, then subtracting a 1% tax for wealth in excess of $100 million would leave him with over $1.015 billion, after taxes. For someone with $110 million in intangible assets, the tax would leave them with $109,900,000. The tax is just crumbs for the uber-wealthy. But they don’t want to lose anything, no matter the minimal cost. The Hanauer family’s net worth is estimated around $1 billion. Maybe Nick just doesn’t want to pay the tax.

The presumption of the wealthy fleeing due to taxation contradicts actual studies, which show the annual millionaire migration rate is 2.4%, lower than the migration rate of 2.9% for the general population, and much lower than the migration rate of 4.5% for low-income people.

But let’s give Hanauer the benefit of the doubt and say that one-third of the uber-wealthy would flee the state to another state, such as drought-stricken California with its top marginal income tax of 13.3%, or like the snake-infested, hurricane-prone, no-income-tax state of Florida. Then our state would only bring in $2.1 billion annually from this new tax on the uber-wealthy. And if the tax gets Brian Heywood, the tax-dodging hedge fund manager who bankrolled the statewide initiatives that sought to repeal the capital gains tax and the climate control act, to decamp to another state, I say good riddance!

Senator Noel Frame has been working and advocating for a tax on intangible wealth for years. Her bill, sponsored by over one third of state senators, is estimated to raise $3 billion a year. It would fund the Housing Trust Fund and the Education Legacy Trust Fund. It is an excellent template for building a robust and equitable tax system.

As it stands, Washington’s tax system is unfair and ranked the second most regressive in the nation, after Florida’s. The Institute on Taxation and Economic Policy calculates that Washington’s middle class pays 11% of their income in state and local taxes and the top 1% pays just 4%. The top 0.04% of Washingtonians that would be subject to the wealth tax pay an even smaller proportion, while massively benefitting from federal and Washington state legal and taxation systems which have enabled them to amass their uber-wealth.

We need actual policy to enable working people and their families to progress and thrive, not just slick rhetoric. Governor Inslee’s proposal for a wealth tax would enable the public services we should be demanding, leading with our constitutional paramount duty for the education of all children. As State Representative Shaun Scott notes on Bluesky, “To the extent that neoliberal Democrats in control of prosperous ‘blue’ state governments are unwilling to tax the ultra-wealthy to fill the coming void of services created by Trump’s executive actions, they’re complicit with them.”