US state proposes wealth tax on billionaires

Washington state representatives have proposed a bill that would impose a one percent wealth tax on billionaires.

House Bill 1406 aims to improve equity among taxpayers in Washington state by creating a wealth tax which covers “extraordinary” financial intangible assets such as futures contracts, stocks and bonds.

Representatives underlined Washington’s long standing role in enhancing innovative and bold ideas which makes it a home for many of the world’s greatest innovators, artists, and entrepreneurs.

However, growing wealth inequality and tax structure has been threatening Washington’s social and economic status. 

“Asking the state's poorest residents to pay six times more in taxes, as a share of their income, than the state's highest income households, including some of the wealthiest individuals in the world, is unconscionable,” the representatives said in the bill.

According to the tax system of the state, low income families pay nearly 18 percent income tax, while middle income families pay 11.

Compare this to the highest income households who pay three percent or less income tax.

The wealth tax bill would only cover a dozen people. Four of them, Jeff Bezos, Bill Gates, Steve Ballmer, and Mackenzie Scott, would account for 97 percent of the tax’s revenue.

These four men own almost $480 billion meaning they would be in line for having to pay $4.8 billion a year should the bill pass.

The legislature “intends to invest the revenues generated by the Washington state wealth tax to fund other critical services, such as education, child care, public health, housing, and public safety,” the bill read.

Together with Washington, some other US states are considering similar tax legislations to compensate for budget deficits which have increased especially after the pandemic.

Could Washington billionaires avoid tax?

According to Washington state law, people could spend up to 182 days a year in Washington without being subjected to the tax, provided they can demonstrate their other residency location was their primary address.

Among the top four billionaires, Jeff Bezos spends much of his time in Washington DC as his residence is not far from his company’s second headquarters in Northern Virginia.

Washington has no state income tax, so billionaires departing to other states would not directly harm its local economy as much as others where wealthy residents contribute directly to their economy.

Inequality accelerated under the pandemic 

Since the beginning of the pandemic, the combined wealth of the world’s ten richest men rose by $540 billion, an amount that would be enough to prevent the world from falling into poverty as a result of the virus. It would also financially provide vaccinations for everyone, according to UK charity Oxfam.

The Oxfam report entitled ‘The Inequality Virus’, said that history will “likely remember the pandemic as the first time since records began that inequality rose in virtually every country on Earth at the same time.”

In the early days of the Covid-19 crisis, dips in stock markets around the world caused a dramatic reduction in the wealth of the richest people. The setback was short lived: the fortunes of the top 1,000 billionaires had returned to their pre-pandemic levels in just nine months.

The wealth of worldwide billionaires increased by $3.9 trillion from March 18 to December 31, 2020, and now stands at $11.95 trillion - to put it into perspective, this amount is equal to what G20 economies have spent in combating the pandemic.

On the other hand, the recovery of the world's poorest people could take 14 times longer, or more than a decade.