Let me start by saying that I am a lucky guy. I’m a self-made man who retired at 33, is way overmarried to a fabulous physician and is blessed with three great kids who are in a wonderful local school. I was raised by two hardworking school teachers in Spokane and received a good public education.
I worked hard in school, graduated from Dartmouth, and had the good fortune to work at Microsoft in the late ’80s and early ’90s . I chose to save most of what I earned and, along with several enormously capable colleagues, I founded a new company called Onyx Software in 1994. We risked all we had financially and put all of our wits and energies into making it a success. Through tireless effort and the hiring and retaining of a lot of remarkable employees, Onyx grew rapidly and was one of the area’s most dynamic companies in the late 1990s. During its existence, Onyx employed hundreds of people, which generated hundreds of millions in tax revenues for municipal, county, state and federal coffers.
I left Onyx over a decade ago to pursue philanthropic and other personal interests. I was confident that if I invested my assets wisely, I would be able to provide my children with the best education available, give generously to charities, and pursue and invest in new business opportunities. Over the course of the last 10 years my wife and I have given hundreds of thousands of dollars to charities and paid tens of millions of dollars in local, state and federal taxes.
From a purely economic standpoint, I have been and continue to be a very productive member of society. Conservatively, for every dollar I invested in starting Onyx, the public treasuries received a multi-thousand dollar return.
Unfortunately, the economic class warfare that is now so de rigueur makes me a bad guy. I am one of the top 3 percent of income earners in Washington state that will be targeted by Initiative 1098, the state income tax.
Since I am so fortunate financially, I’d like to share with you what I do with my money and let you know how my investment decisions will be affected, should this initiative pass.
A state income tax of 9 percent, coupled with a federal tax rate of 39.6 percent and a 4 percent Obamacare tax will make my top tax rate 53 percent.
There is a wide perception that the wealthy live with a mattress stuffed full of cash and coins, and have nothing better to do with it than waste it on personal extravagances. On a good day I’ll have a couple hundred bucks in my wallet. All of my wealth is invested (about 50 percent locally) in real estate, stocks, bonds and a variety of small businesses. Each of these investments is generating local, state and federal taxes. Even if the value of my investments declines (as it has significantly over the past few years), the individual investments remain hard at work creating jobs, payroll taxes, business and occupation taxes, sales taxes, Social Security taxes, excise taxes, property taxes and a myriad of other fees.
Through my investments I am easily in the top 3 percent of earners and one of the most productive generators of taxes and jobs. I don’t mean to say that a teacher, a stay-at-home parent, or a machinist isn’t productive; what I mean is that the size of my investment base makes my production of tax revenues for government much more significant. I am a proverbial large hand when it comes to feeding public coffers.
If 1098 passes it will have two enormous unintended consequences:
It will reduce the risk-taking and investment of entrepreneurs and business owners. With fewer dollars to invest, and fewer rewards for investing in a riskier economic environment, fewer risks will be taken. As an example, despite the local real estate malaise, I am currently developing 14 new homes in Seattle. I wouldn’t choose to make these types of investments in such a risky environment in the future for a minority of any marginal profits.
An income tax will simply modify the behavior of our state’s most productive citizens. Like John Kerry registering his yacht in Rhode Island, drivers buying gas in border states, or all of us who consider sales tax as a factor in our on-line purchases, people will avoid generating excessive income to avoid the tax.
At its core, 1098 presents a very stark choice to voters: Keep the earnings of our state’s most productive citizens hard at work in their investments as they use their abilities and the markets to choose, or force the most productive to turn over 9 percent of their investments to our state government and its inefficient delivery of services.
I have the mobility and ability to take my assets and invest them or live with them wherever I want. I have the ability to determine whether or not I have ample resources to give to charity, or not. If 1098 passes, my ability to continue to support local charities will be severely impacted. I hope that the thousands of employees of local charities will consider this when they vote on this measure. Their organizations are reeling and are most dependent upon the largess of the top 3 percent.
Stop the class warfare. Transferring more of the investment returns of our top producers to the state government will create much more long-term harm than short-term benefit. The most productive will instead choose to invest elsewhere or will choose to not invest, and will indeed start to horde cash and become the hunkered down hermits that we are currently portrayed to be.