Dan Price, who’s famous for setting a $70,000 minimum wage at his company, has a message for government leaders in his home state of Washington, and in the federal government: Please raise taxes on the wealthiest Americans.
In testimony before the Washington State legislature a year ago, Price, the CEO of credit-card payment processor Gravity Payments, formally asked to have his own taxes increased. These days, he’s a vocal supporter of Washington’s proposed HB 1406, a law that would impose a 1 percent tax on Washington residents with a net worth of more than $1 billion. In a scathing tweet this week, he disputed the argument that most billionaires shouldn’t pay additional taxes because they are philanthropists who already put their money to good use.
“One of capitalism’s biggest PR scams is the ‘philanthropist,’ ” he tweeted. “The average billionaire donates 1 percent of their fortune to charity yearly–less than non-billionaires. But when you donate $200 you don’t get glowing articles, a hospital named after you and a massive tax write-off.”
There’s a lot to argue with in that tweet. First of all, when you donate $200 to a nonprofit you do get a $200 write-off. Second, according to MarketWatch, Amazon founder Jeff Bezos, the biggest donor of 2020, gave away 0.47 percent of his net worth, while the average American gives away about 2 percent of his or her disposable income every year. That’s an apples-to-oranges comparison if ever there was one.
Should the ultra-rich pay more than they do?
But what about the larger question of whether the wealthiest people should pay higher taxes? That may be one area where most of us agree. A Reuters/Ipsos poll published right before the pandemic found that almost two-thirds of Americans, and more than half of Republicans, favor higher taxes on the ultra-rich as a way to address growing economic inequality. Increasing taxes on the wealthy is an idea that traditionally gains popularity during times of economic uncertainty, so it’s likely that even more people would support the idea now.
Some opponents argue that raising taxes on the wealthiest will create a disincentive for innovation and entrepreneurship. But let’s take a quick look at the past. The 1960s saw the founding of Walmart, Nike, and Southwest Airlines, among many others. The 1980s gave us Bloomberg, Adobe, AOL, and Dell. Amazon, Netflix, eBay, and Google were all founded in the 1990s. One thing all those decades have in common is that tax rates on the wealthiest were much, much higher than they are today. In fact, a recent study showed, the wealthiest 0.01 percent have seen their tax rates decrease by 83 percent since 1953.
A second, more pessimistic, argument is that we shouldn’t raise taxes on the ultra-rich because Bill Gates and Warren Buffett have a much better idea of how to spend money for good than our federal or state governments do. That could be true of those specific two billionaires who are both philanthropic powerhouses. But if you’re right-leaning, you may not be wild about how George Soros spends his money, and if you’re left-leaning, you may feel similarly about Charles Koch.
In a way, it comes down to what you think about democracy. Our system is founded on the idea that the government collects money from everyone and then our elected officials decide how that money should be spent. If they do a bad job, they are answerable at the voting booth. Whatever your political beliefs, I’m guessing you agree that recent history has shown us plenty of flaws in our system. But it still seems better to me than leaving as much money as possible in the hands of billionaires who answer to no one.
Is Jeff Bezos a Washingtonian?
Which brings us back to Washington’s proposed billionaire tax. It’s billed as a tax targeting Bezos specifically, but the state’s calculation of revenue from the proposed tax don’t seem to take his billions into account. They may be assuming that his legal residence is elsewhere (he also has homes in Texas, New York, and Washington, D.C.). Or perhaps that he’ll change his legal residence if the new tax becomes law.
Washington is unusual in that it has no state income tax, which means its tax revenue from individuals all comes from sales and property tax. Thus, the wealthy and the poor are taxed at the exact same rate whereas income tax is a usually a “progressive” system in which higher earners pay more. As a result of Washington’s “regressive” system, one analysis found, residents who make less than $24,000 a year pay about 18 percent of their income in taxes, while the very wealthiest pay only 3 percent.
Proponents say that the billionaire tax will address some of this unfairness and also provide a quick infusion of funds that the state badly needs. If it passes, it will be the nation’s first tax calculated on someone’s net worth rather than his or her income. But it may not be the last. Other states, including California and New York, also have proposed measures to tax those above a certain net worth.
These proposals may have a hard time getting enacted into law, and if they pass, the states that pass them may have an even harder time collecting the billionaires’ tax payments. Whatever the fate of these specific laws, though, Price has a point. The nation’s wealthiest 0.01 percent probably should pay more taxes than they do. How much or how little they give to good causes won’t change that.