House Finance Chair targets billionaires with wealth tax estimated to raise $2.25 B in 2023, doubling by 2024.

It’s the most audacious “tax the rich” scheme introduced in the state Legislature yet. House Finance Chair Noel Frame has introduced a new wealth tax proposal, HB 1406, which is scheduled for a first hearing February 2. The list of 26 sponsors suggests the bill is less than an idle trial balloon, as it includes former House Speaker Frank Chopp, House Appropriations Chair Timm Ormsby, and House Majority Leader Pat Sullivan.

Paul Queary reports in the Washington Observer, 

…suppose the Legislature decided to go directly after the really big fish — the state’s billionaires.

That’s exactly where House Finance Chair Noel Frame went on Wednesday. Her House Bill 1406 would impose a 1 percent annual wealth tax on “intangible financial assets” (think stock, bonds, etc.) over $1 billion. Frame says the Department of Revenue estimates it would hit just 100 people and bring in $2.25 billion per year. 

Frame also intends to fund fully the state’s on-the-books-but-not-paid-for Working Families Tax Credit, Queary writes,

…So we’re talking some real Robin Hood action here, grabbing the actual wealth of Washington State’s richest and pushing it out to the working poor. The formal list of that 100 people is strictly confidential — even Frame hasn’t seen it — but we can be sure that it starts with Amazon founder Jeff Bezos and includes Microsoft founder Bill Gates, former Microsoft CEO Steve Ballmer, investor and activist Nick Hanauer, and a bunch of other recognizable names.

Geek Wire reports,

House Bill 1406 would produce an estimated $2.25 billion in 2023 and $5 billion in 2024, according to Rep. Noel Frame (D-Seattle), chair of the state’s House Finance Committee who introduced the bill Wednesday with House Majority Leader Pat Sullivan (D-Covington).

In an interview with GeekWire, Frame said the intent of the wealth tax is part of a larger effort to help to restructure the tax code in Washington state, which she described as the most regressive in the nation. Washington is also among nine states that do not have income taxes.

There’s little the tax wouldn’t fund, apparently.

The revenue would be used to offer credits against taxes paid disproportionately by low-income and middle-income families, as well as small companies and low-margin businesses. It would also fund education, child care, public health, public housing, and public safety services.

Geek Wire explains,

The bill would tax “extraordinary financial intangible assets” such as cash and cash equivalents; publicly-traded options; futures contracts; and stocks and bonds. The first $1 billion of assessed value would be exempt.

Geek Wire and the Washington Observer have good initial discussion of the wealth tax, including this comment in Queary’s report by one of the state’s prominent attorneys.

Along with its sheer audaciousness, the plan has the added appeal of apparently dodging the decades-old constitutional barriers to imposing a progressive income tax. The Observer reached out to University of Washington Law Professor Hugh Spitzer, an expert on these matters.

“In my view, a wealth tax/intangible property tax would be a type of property tax,” Spitzer told the Observer via email. “In the 1930s, Washington considered imposing taxes on intangible property like stocks and bonds. But those types of assets are notoriously hard to track, so we never moved ahead with it.”

We’d add that Spitzer also believes that were the Legislature to enact a graduated income tax today, it would past constitutional muster

There’s not been much analysis of Frame’s new bill, but the wealth tax has been much in the news in recent years. We’d refer readers to this Tax Foundation report and this AEI analysis, This month, Michael Hendrix wrote in Governing magazine

There are taxes on the wealthy, and then there are “wealth taxes.” The former usually means hiking taxes we’re familiar with, such as those on incomes, home purchases or the sale of pricey assets. A wealth tax, on the other hand, takes a regular cut of the fluctuating market value of every asset you own: homes, art, company shares — it’s all up for grabs.

Details matter. And Frame’s proposal differs from proposals considered proposed by U.S. Senators Warren and Sanders, as well as those introduced in California and New York. As well, though, it’s not unusual for tax policies with a sharp initial focus to expand over time. So these concerns raised by Hendrix may be worth pondering:

Wealth taxes act as a powerful disincentive to creating new businesses. Even a small levy would take a big chunk out of annual returns; for instance, a 3 percent wealth tax would take a 100 percent bite of the income from an asset earning 3 percent a year. Investors would likely invest less — and less often — since they would have to keep more dollars in reserve to pay taxes, and each new investment would mean more exposure to taxation. Some of the biggest losers from the wealth tax would not be the wealthy, but entrepreneurs and risk-takers who would find it harder to grow their small business and would be likelier to sell to a bigger business for cash to pay their taxes.

More later. Probably.