Saturday, August 14, 2010

Bill Gates Sr. Goes to the Head of the Class of the Self-Hating Rich

Bill Gates Sr (Father of Microsoft Bill) is co-author, with Chuck Collins, of the book Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes, a defense of the estate tax. But that is not enough in tax demands from the man. He is also, now, an advocate of an income tax for the state of Washington.

WSJ reports:
The battle between taxpayers and government unions will define the fiscal future of the 50 states, and the newest battlefield is Washington state. That's where a few rich taxpayers led by Bill Gates Sr. and the Service Employees International Union (SEIU) are bankrolling a November ballot measure to create the state's first income tax.

And not just a toe-in-the-water tax. They're diving into the deep end with a proposal that would immediately impose a 5% tax rate on income above $200,000, or $400,000 for married couples. The rate would climb to 9% on single filers making $500,000, or $1 million for couples...

To win votes, the ballot measure resorts to all sorts of trickery. Unions describe the initiative as tax "relief" because it includes a mandatory cut in the hated property tax (only by 4%) and it eliminates various unpopular fees and taxes on business. Still, the overall impact of the measure is a $1.5 billion tax increase in 2012 and $2.5 billion a year by 2016. Small business taxes are cut, but they are also hit with a whopper of a new tax: a personal income tax paid out of their profits. Over half of the tax will be paid by Washington businesses.

The biggest deception is the description of the new income tax as "an excise tax on income." This language is cleverly designed to dodge the state's constitutional prohibition against an income tax and the requirement that any tax be "uniform upon the same property." Obviously a tax that hits only 3% of taxpayers and applies graduated rates is anything but uniform. Proponents claim that because the tax is withheld from worker paychecks, the money was never the property of the person who earned it. That's like saying if someone steals your paycheck, it's not your property.

We hope Washington voters aren't duped by the claim that only the rich will pay this tax. After two years, the law allows the legislature by simple majority to extend the tax to nearly everyone. The revenue from the tax will finance new spending, which will soar and lead to even higher deficits in the next downturn, which will create political pressure to expand the tax to the middle class.

Income taxes are always sold as a one-time way to reduce deficits, but they always become engines of greater spending, and eventually deficits. Just ask Californians. If Mr. Gates wants the rich to finance more Washington spending to create more SEIU dues-paying jobs, he and his son can do so by donating their own fortunes
There is simply no economic justification for such a tax. As WSJ also points out, Washington has close to the highest sales tax burden in the nation, varying by area but reaching as high as 10% in Seattle depending on what you buy.

It's hard to understand how men like Gates advocate what they do. I believe at the core it has to be a fundamental ignorance of complex economics. As F.A. Hayek taught, accumulations of capital advance a country, not a dispersed capital base. Hayek was such a strong believer in this view that he said if all wealth was dispersed equally across the land, it would make sense to randomly create wealthy people, so that a country could grow.

Put simply, capital grows a country, and the wealthy have the capital to make such growth occur. To tax their estates and their income, is simply damaging to the overall long term growth of a country. Gates doesn't get this.

He, thus, turns into a leading member of the self-hating rich (otherwise known as the economically ignorant rich). Mind you, none of these self hating rich, hate their rich status so much that they give away their fortunes and take vows of poverty, but they sure do want to use the power of the state to tax other more well-adjusted rich and take those taxed portions of those pools of capital and spend it on Gates Sr's favorite projects. Bizarre.


  1. As you state, they don't take vows of poverty. I don't think they are as self-hating as they are hateful and resentful of those at the bottom trying to make a better life for themselves.

    It has to do with some kind of deep down desire to prevent those at the bottom from rising to the top. It has to do with envy, especially by those whose being at the top (economically) wasn't by any particular hard efforts on their part (if you know what I mean). But for the already rich and powerful, to interfere with the efforts of others directly would be too obvious, so it's easier to use the armed power of the State to do their dirty work.

    They use the compulsory tax structure to make it impossible to afford the fees required to start a business or to expand one's business, they impose as many regulations as possible to prevent small businesses and startups from growing, and the elites now want to steal more of families' wealth and possessions that might help the grandchildren of those families' elders make a better life for themselves and invest in a worthy endeavor.

    If I could afford to actually move, I'd move out of this ghastly People's Republic of Massachusetts, but it sure as hell isn't going to be Washington!

  2. My guess is that tax exempt income is excluded from the excise tax, which means that the wealthiest people would be exempt since most of their income comes from this source.

    I am sure over time this will drive people from the state, but the more likely reality is that people will just up their incomes, cut expenses or increase prices to replace the money taken by the new taxes. For instance, today it takes roughly $1.5m to have a million net. After Obama's medicare and expiration of the Bush cuts, you will need to make $1,578,000 to clear a million.

    If you are a W-2 earner, its a matter of having your income increased by $78k for every $1m. For a business owner its a matter of cutting expenses/increasing revenue or both by the same amount for every million. Regardless, the taxes will be passed along. The intelligent Dem pols know this but to their economically/ financially challenged constituency, they will be hero's for their theft.

  3. Philanthropy is engaged in, only by those people of great arrogance. It is sad to see successful businessman exaggerating their own importance by such overbearing behavior.