Former Starbucks CEO Howard Schultz
A looming income tax on millionaires in the state of Washington may already be driving away one of the state’s most prominent entrepreneurs and wealthiest residents – and should serve as a warning sign of the perils of “soaking the rich.”
Earlier this month, former Starbucks CEO Howard Schultz, credited with building the coffee chain into a multinational empire, announced that he and his wife are starting their “retirement phase” and moving to Florida after nearly 50 years in Seattle. “We will be forever grateful for the memories made in Seattle and the relationships built along the way,” Schultz, who is worth an estimated $3.5 billion, wrote on LinkedIn. “To the family, friends and partners who made Seattle our home for so many years, thank you.”
But the Schutlz family’s move is likely motivated by more than just “retirement” and the Florida sunshine. The Washington Legislature recently passed a bill that would impose a 9.9 percent tax on income over $1 million – in addition to a 9.9 percent tax on long-term capital gains over $1 million (and a seven percent tax on long-term capital gains over $250,000). Florida, notably, has no income tax and no capital gains tax.
Democrat Governor Bob Ferguson has indicated that he intends to sign the bill, despite a 1933 state Supreme Court decision which struck down a voter-approved income tax that targeted high earners. Washington Democrats believe the state Supreme Court will now overturn that ruling and allow the new income tax to stand. (In the years since that 1933 ruling, Washington voters have repeatedly rejected income tax proposals at the ballot box.)
Even though Washington is now a Democrat stronghold, it remains one of just nine states in the country with no income tax. But exorbitantly expensive liberal policies have left the state facing a $4.3 billion budget deficit with few means to fill it other than raiding the pockets of Washington residents.
“For years, warnings about Washington’s unsustainable spending growth went unheeded,” Ryan Frost, Director of Budget and Tax Policy at the Washington Policy Center recently wrote. “You cannot triple the size of government in a decade without eventually hitting a wall. That reality is now coming into a sharp focus.” Frost also noted that the state already collects “more money than ever” thanks to increases in other taxes, but is still facing a massive shortfall due to runaway spending.
Now, Democrats are turning to their favorite punching bag to blame for the crisis they created: rich people. If only the rich would “pay their fair share,” Washington Democrats say, all their budget problems would be solved. Democrats pushing the “millionaires tax” say the revenue “will fund critical services like public education, early learning and child care, health care, and other services Washington families rely on.”
But as renowned economists Arthur Laffer and Stephen Moore warned in a recent Wall Street Journal op-ed, raising taxes on the rich often has the opposite of the intended effect.
“The decision to enact an income tax bodes ill for Washington’s economic future,” they wrote. “Eleven states have done so since 1960… We found that every one of them significantly underperformed the rest of the nation in every economic measure we looked at, including share of the nationwide population, income, and state and local tax revenue.”
In the late 1970s and early 1980s, Laffer popularized what is now known as the “Laffer Curve,” which models government revenue in relation to tax rate. Laffer theorized that increasing taxes beyond a certain rate actually has a negative impact on government revenue, as high taxes depress economic output. The first Trump administration seemed to prove this theory correct, as government revenues increased despite significant tax cuts.
Blue states like California and New York have also experienced the downside of the Laffer Curve first-hand – and now Washington may be following that same path of failure. Facebook founder Mark Zuckerberg is just the latest high-profile billionaire to flee the Golden State for Florida – no doubt influenced by a proposed one-time five percent tax on the net worth of California residents with assets exceeding $1 billion.
Google co-founders Larry Page and Sergey Brin, Oracle co-founder Larry Ellison, and PayPal/Palantir co-founder Peter Thiel have also left California. And just last week, Empire State Governor Kathy Hochul was desperately begging wealthy New Yorkers to come back from Florida after acknowledging that the state has lost its tax base.
Businesses and individuals already suffer through crushing taxes at both the local and state levels in Washington, according to Center Square. For some, a millionaires’ tax may be the final straw that pushes them to leave for greener pastures, as an attorney for start-ups testified.
The few Democrat legislators who voted against the proposal “know that such tax hikes often backfire, driving out the very people who keep government motors running,” Liz Peek wrote in The Hill. “Also, with an ever-expanding budget, they expect the levy will soon morph into a statewide income tax.”
That analysis has a solid grounding in history – taxes that only apply to “the rich” are inevitably expanded to everyone else. The first federal income tax in 1913, for instance, was just one percent on personal income over $3,000, or about $100,000 today, with additional surtaxes capping out at seven percent on income over $500,000. In total, it affected less than one percent of the population. Today, the top federal income tax bracket is an eye-watering 37 percent, and all Americans who earn income pay federal taxes.
If Washington Democrats think they can tax their way out of a spending problem, they may soon find they’ve taxed away the very people footing the bill.
Matt Lamb is an AMAC Newsline contributor and associate editor for The College Fix. He previously worked for Students for Life of America, Students for Life Action, and Turning Point USA. He previously interned for Open the Books. His writing has also appeared in the Washington Examiner, The Federalist, LifeSiteNews, Human Life Review, Headline USA, and other outlets. The opinions expressed are his own. Follow him @mattlamb22 on X.
