- Washington lawmakers are considering a billionaire wealth tax. It would be the first one in the US.
- The bill, introduced by Rep. Noel Frame, counts Dan Price, CEO of Gravity Payments, as a supporter.
- The credit card processing millionaire told Insider why he believes the bill is necessary.
- Visit the Business section of Insider for more stories.
Wealth inequality hits close to home for Dan Price.
The CEO of Gravity Payments, a credit-card-processing company based in Seattle, Price is perhaps best known for taking a million-dollar pay cut and setting a $70,000 minimum wage at Gravity Payments in 2015. The company’s sleek headquarters are located in the trendy downtown Ballard neighborhood, adjacent to Ballard Commons Park and its homeless encampments.
“At any given time, we have 20 to 25 neighbors who are homeless,” Price told Insider. “Just walking by and getting to know them over a couple of years, it doesn’t feel right.”
Price, himself a millionaire, is one of several entrepreneurs supporting HB 1406, a bill currently under consideration by Washington lawmakers.
If passed, it would implement America’s first ever net-worth tax — major news for a state like Washington, which faces a $3.3 billion budget deficit and is known for having one of the most regressive tax codes in America.
Under the current code, low-income families pay nearly 18% in taxes versus 3% or less for the highest-income households, making a net worth tax an obvious bipartisan solution, Price says.
“Republicans don’t like seeing small businesses being squeezed any more than Democrats do,” he said. “What’s changed people’s perception and attitude towards this is that reality has gotten far worse at a faster rate than I’ve ever seen before in my life.”
Constituents are ‘hungry for change’
This isn’t the first time a net worth tax has been on the table — California’s previous attempt in 2020 failed to pass.
But Price and other supporters believe the pandemic recession has changed public opinion towards wealth taxes. (Even before the pandemic, a majority of Americans supported a wealth tax on the ultra rich, according to a Reuters/Ipsos poll.)
Price himself has practically begged to be taxed at a higher rate. “I’ve been demanding to Washington State to tax me more,” he said.
On one occasion, a little over a year ago, Price drove the three hours down to Olympia to testify at an open session at the state’s capital, where he formally asked for his taxes to be raised.
Rep. Noel Frame (D), who introduced the bill in February, told Insider that her constituents — similar to Price — are “hungry for change.”
“So many folks have lost their jobs and their healthcare,” she said. “We legislators have been hearing from constituents who are barely making it. And as we are thinking about how we recover, rebuild, and reimagine our economy, there are really hard questions about who’s going to pay for it.”
As Frame points out, even if the tax passes, billionaires would still pay a lower percentage than low-income households. And to the critics who say the tax unfairly targets a small group of individuals, she says that Washingtonians are already asked to pay taxes on their wealth-building assets; this simply applies to financial assets currently ignored by the state tax code.
“We ask middle-class people to pay on their wealth-building assets, which is their home,” she says. “If we can ask them to pay 1% on their home, which they can’t liquidate to pay their taxes, why would billionaires be treated differently?”
How the wealth tax would work
The bill, 1406 HB, would apply to taxes due in 2023 and is estimated to generate $4.9 billion in revenue. Frame says the only other way to generate that much revenue in a short amount of time would be increasing sales tax.
Washington state is known for being home to the world’s richest person, Amazon founder and CEO Jeff Bezos, but the state is actually home to approximately 100 billionaire taxpayers. (The state’s department of revenue used data from the IRS and the Federal Reserve as well as proprietary information from Forbes to arrive at that figure.)
Only financial intangible assets, such as stocks and bonds, will be subject to a 1% tax with the first $1 billion being exempt. Private company ownership would only be valued if held through a specific type of business partnership called a subchapter K entity. Harder-to-value assets such as art and trademarks would not be assessed.
In theory, billionaires could declare that their primary residence is outside of Washington state, says Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center. But even if that’s the case, Holtzblatt says the tax could still generate significant revenue. The bigger issue is that stipulations of the bill, which is expected to only require nine full-time employees and under $5 million annually through 2027, make the tax easier to implement — and easier to evade.
For instance, billionaires might be able to invest their personal cash into a privately owned business to avoid tax on what’s in their bank account. The tax also creates an incentive to buy exempt assets such as art or jewelry, which has been observed in some European countries that have wealth taxes with similar loopholes.
Price acknowledges that executing the tax will come with complications, pointing out that the IRS already audits higher-income taxpayers less often, since it requires more resources. But he contends the tax is still well worth the effort.
“It’s making that first little shift towards rebalancing the scale,” he said.
And even if billionaires do end up leaving Washington to avoid the tax, Price says the state won’t notice much, as it does not currently impose income or capital gains taxes, meaning there will be little to lose if a few billionaires decide to move.
“It would be like if we had a movie theater and we needed to keep the lights on,” Price said. “We’re running out of money, and these people have been sneaking in the back. If they don’t come because we charge them, it doesn’t matter. They’ve been sneaking in all this time.”