Economist suggests the wealth tax on billionaires could touch everyone. Billionaire suggests state should be cautious.

This early in the session, there’s no telling whether the proposed wealth tax on billionaires has a legislative future. In last week’s newsletter, we wrote of one challenge such ideas often face:

2) the public resists the proposal because people believe the tax burden will ultimately creep down the income ladder and capture a broader middle-income base.

Washington Research Council economist Kriss Sjoblom takes a look at the tax in a recent WRC blog post. His discussion is worth reading in full. As for the notion that the burden would creep down, he notes:

The state constitution requires all taxes to “be uniform upon the same class of property.” (It was this provision that the 1933 state supreme court cited in ruling a progressive income tax to be unconstitutional.) The wealth tax’s $1 billion exemption would seem to be a pretty clear violation of uniformity. The fiscal note acknowledges there is “risk that the courts would invalidate the wealth tax on the grounds that it … conflicts with the uniformity provisions of …” the state constitution.

I doubt the court would invalidate the whole bill, as it includes this severability clause:

Sec. 14. SEVERABILITY CLAUSE. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

Given this, the most likely outcome would be for the court to throw out just the $1 billion exemption, leaving in place a wealth tax for all.

Not exactly the sponsors’ intent, but is it a risk? We’re not in the business of predicting state Supreme Court decisions, but we’re also not rushing to discount the possibility.

And speaking of billionaires, Geek Wire reports the views of one of the state’s new members of the group. Just as we’re not in the habit of predicting court decisions, neither do we hasten to tax tax advice from Californians. In this case, however, we’ll make an exception.

The underlying message from Hindawi: Washington needs to be careful not to follow the anti-business policies he left in California…

“The state of Washington has a very attractive tax regime today, and the Governor continues to say he wants to change it,” said Hindawi.

That philosophy is not helping the state attract new businesses, he said, at a time when many companies are considering relocation.

“Cause and effect is, if you keep on telling people you’re going to raise taxes, people keep on not coming,” he said.

He calls out the proposed capital gains tax.

“The Governor needs to understand that every time he says ‘capital gains tax,’ he loses ten companies,” said Hindawi, who co-founded Tanium with his father in Berkeley, Calif. in 2007 and last week raised another $150 million in funding. “When he wakes up and says it into his pillow, five companies don’t move. This is becoming a huge PR issue for Washington state.”

Regarding the wealth tax,

A wealth tax will not change where Hindawi wants to live — noting that Seattle’s quality of life was the big driver in his relocation. But he added that his peers in San Francisco and elsewhere who are looking to relocate will view it as “vilification.”…

if Washington state doesn’t want to maintain an attractive tax system that allows Seattle to compete with Austin, Denver and Nashville. And he thinks that’s misguided.

“People can argue that it’s right or it’s wrong, but it’s somewhat irrelevant,” he said. “The question is actually do you want these people moving to your state or not?”

If you do, what tax policies would you pursue?