Surprising Voices On Both Sides of Wash. Income Tax Measure

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SEATTLE - For the first time in nearly forty years, Washington voters will decide whether to create an income tax. Initiative 1098 has triggered a heated debate among Washington’s wealthiest citizens: the ones targeted by this “tax-the-rich” proposal. There are voices on both sides of the debate that might surprise you.

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Howard Behar is the retired president of Starbucks North America. He supports taxes but not I-1098. By Austin Jenkins. hide caption

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Take Howard Behar. He’s the retired president of Starbucks North America. You can guess where we meet.

Howard Behar: “We ought to be at a Starbucks drinking Starbucks coffee. I still love it!”

It’s too crowded inside, so we sit outside on a breezy fall morning. Behar tells me he’s a political independent. But he mostly contributes to Democrats. And in 2008...

Howard Behar: “I voted for Obama.”

He even once wrote an editorial calling for a state inheritance tax.

Howard Behar: “So you’re not talking here to a guy who doesn’t believe in taxes, I do.”

Austin Jenkins: “So, why are you against I-1098?”

Howard Behar: “It’s not the money, you want me to pay. I’ll pay, as long as everyone else pays somewhat of their share.”

On principle, Behar thinks if there’s going to be an income tax in Washington then everyone should pay it. Even if the poorest wage-earner only pays a buck. But he’s got another complaint too. Behar has no confidence the money the initiative would raise will transform the two areas it boosts funding for: education and healthcare in Washington.

Howard Behar: “I want results for my money. I want to know who’s accountable for it. I want to know what happen when they don’t achieve it. I don’t want just blank checks written.”

A state fiscal analysis estimates the high-earners income tax would hit the top one-point-two percent of Washington taxpayers and bring in about $2 billion a year to state coffers. Critics say don’t bet on it because wealthy people’s income is very volatile. In any case, here’s how the tax would work. The first $200,000 an individual makes would be exempt, $400,000 for a couple. Any income above that would be taxed at 5-percent. The tax rate would climb to 9-percent for incomes over half-a-million dollars, a million dollars for couples. The ballot measure would lower the state property tax levy and significantly increase Washington’s Business and Occupation Tax exemption. That’s to soften the blow of the tax on high-earners.

Dick Chapin: “I’m for it for it the same reasons I was for it forty years ago.”

That’s Dick Chapin. You wouldn’t think he’d support the income tax. He’s a former Republican state lawmaker and a retired real estate attorney who represented developers.

Dick Chapin: “I’m a very pro-business, pro-development guy.”

He doesn’t earn enough in retirement to pay the tax. But since the 1970s, when he served in the legislature, Chapin has believed Washington needs an income tax. He argues Washington’s current tax system is regressive, unstable and keeps schools at a competitive disadvantage. He believes the best way to turn that around is through an income tax.

Dick Chapin: “I think it’s a no-brainer. We’ve needed one for forty years. The legislature has simply lacked the courage to pass one. When the legislature won’t act for something that we need, then it’s up to the people.”

One of the key arguments against I-1098 is that it will hurt Washington’s competitiveness. To hear that argument firsthand, I went to 37th floor of a downtown Seattle office building where multi-billion dollar business deals are made.

Bob Nelsen: “I’m Bob Nelsen. I’m the managing director and one of the co-founders of Arch Venture Partners.”

Nelsen is a study in contrasts. He’s soft-spoken but has a thing for pistols. He leans Republican, but was an early supporter of candidate Obama. He’s even got a picture of the president in his office.

Austin Jenkins: “How much did you raise for President Obama when he was a candidate?”

Bob Nelsen: “I think I was in the more than a hundred thousand dollar category.”

More recently, Nelsen has written a $15-thousand dollar check to defeat the Washington income tax initiative. He calls I-1098 a tax on innovation. He thinks it sends the wrong message to would-be investors in Washington start-ups.

Bob Nelsen: “Frankly, we’re one of those funds that would have to re-consider our pace of investment here and we’re the largest bio-tech investor in the state. And my out-of-state partners who might be taxed who might be taxed on their investment income in the state are not excited about it.”

Nelsen won’t say how much he’d pay in income tax if I-1098 passes. But Nick Hanauer gives me an idea of what it would mean to him.

Nick Hanauer: “This tax will cost me millions of dollars per year.”

Hanauer is also a venture capitalist. But he’s on the vote yes side of the income tax debate and doesn’t think it will drive away business. We spoke by phone as he jet-setted in Turkey. Hanauer has donated $250-thousand to the yes on I-1098 campaign. He believes taking money out of the pockets of rich people and putting into public education is a smart investment in Washington’s future.

Nick Hanauer: “The state will benefit much more from the addition of school teachers than it will from me continuing to dump gas into my fancy private plane, if, if this tax even forced me to make that trade-off which it does not.”

I-1098 is clearly dividing the rich in Washington, but they’re not the ones who will decide whether taxing the wealthy is good public policy. That job will fall to the vast majority of Washington voters who fall well below the income tax threshold. Even so, one factor that may dictate the outcome of this political fight is whether voters believe someday the income tax would be extended to them.

Copyright 2010 Northwest News Network

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