Washington 1098: Will the Wealthy Leave the State?

Update: It turns out, millionaires don’t care about income taxes.

You’re a Washington business owner making $500,000 a year.

You have millions, maybe tens of millions, in the bank.

You live in a big, gorgeous house on the water on Mercer Island, with sunset views and your sailboat and powerboat out front.

You and your family are actively involved in the community — arts, sports, non-profits, civic groups, and assorted commercial ventures.

Quite possibly, most of your family is here, and maybe has lived here for generations.

You have a large circle of long-time friends here that you love.

If you have school-age kids, they’re in schools that they love. (If the public schools don’t cut it where you are, they’re in great private schools.)

You have everything you want.

So…you’re obviously going to move your family to to Alaska or Wyoming to save $5,000 a year in taxes — for you, mere pocket change. (Note: if you’re only making a measly $400,001 a year, your extra taxes would be … five cents. And that’s not even considering the $4,000 a year your business[es] will save in B&O taxes.)

Yes, you could pretend that your legal residence is elsewhere. But if you’re like most of the people described above — I know, have known, lots of them, so I’m here to tell you — you’re also not willing to lie and cheat to save $5,000 a year.

While you’re thinking about it, check out Sightline Daily’s takedown of The Seattle Timesdeceptive math.



, ,




20 responses to “Washington 1098: Will the Wealthy Leave the State?”

  1. Stradale Avatar

    You have absolutely no idea of what you are talking about. First off, someone as you describe is not making $500,000 as you say. Someone as you describe is easily north of a million a year. And consequently pays enough taxes for 20 people and probably works more hours in a week then those 20 people combined. To take away even MORE is just a travesty and takes away from all that is good in this country. And the fact that the legislature can come back in 2 years and impose this abomination on everyone is reason enough to kill this idea in Washington state.

  2. Asymptosis Avatar

    Stradale, how do you know? Ever been there? Or close? Do the arithmetic.

    The person I described has been making strong six figures for twenty or thirty years (or had a nice inheritance), and has eight figures in the bank/net worth. For that person, $500K/year easily supports the lifestyle I describe. And that’s without touching capital.

    > works more hours in a week then those 20 people combined

    400-800 hours a week. Wow. See “arithmetic,” above.

  3. Starbright Avatar

    Of course they will!

    One thing rich people are good at is financial planning. They make investment and purchasing decision everyday. The moment you change the cost function, even by a little bit, their entire planning staff go to work and come back with a new strategy.

    The rich are always welcome at every community. Even after they have moved away, they are still welcome here. It is not hard for them to jump on the private jet to sit on the skybox in Qwest Field. All their friends will also be there. Just that WA will collect their income taxes or receive their investments anymore.

  4. Asymptosis Avatar

    It’s interesting to hear these fantasies about rich people’s lives from people who don’t seem to know any of them, whose kids don’t go to school with them. Rich people have homes, families, and communities just like everyone else, and they don’t like disrupting them — just like everybody else.

  5. Mike Avatar

    It’s not possible to put all rich under one umbrella. Some wealthy families will see this as much more of an imposition than others. Families that have lots and lots of ordinary income and comparitively low wealth will be hard hit by this tax. Who is in this category? Doctors, lawyers, small business owners, athletes.

    Families that have low ordinary income but high wealth will not feel it as much. Who is in this category? Old money, the retired rich, company founders with lots of stock, Bill Gates, Bill Gates Sr. And not surprisingly all of the high profile rich that have come out in favor of this tax. This is a tax on income, not wealth. My situation?

  6. Mike Avatar

    Continued… My situation? My family is in the situation where we have high income and comparitively low wealth. We don’t have “tens of millions” in the bank. If we take 1098 at face value it will cost my family $200,000 per year, every year. We own two small businesses, it would take some doing but we don’t have to live in Washington. Would we move? It’s hard to say, but we would be crazy not to look at it. $200,000/year buys an awefully nice house in another state. At the very least many rich in my position will “duck” this tax. What do I mean by that? We’ll restructure to decrease the amount of Washington State ordinary income that we have. 1098 will fall short of revenue projections.

  7. Asymptosis Avatar

    Mike, good comments — though I’m not sure I understand.

    (Is there something about the comment system that made you break yours in two? I’ve heard something about that from one commenter before… If so I’d like to fix it.)

    Would you explain why those living off investment income will be hurt less than those living off earned income? I really don’t understand, would like to hear.

  8. Asymptosis Avatar

    Oh and also, Mike, in which states would you find lower effective tax rates for your family? I’m thinking Alaska probably. Others?

    Tangential: a rich guy I knew (single, kids grown) was dying, moved to a hospice in Nevada in time to establish legal residency there to avoid WA estate taxes. But that’s a darned special case, and certainly doesn’t argue for ending our estate tax — then we’d *always* get zero.

  9. Peter Avatar


    Mike: How can your family *possibly* earn enough income for 1089 to cost you an additional $200,000 a year and *not* accumulate significant wealth?

  10. Rick Avatar

    What a shame, greed is an abyss lined with excuses. Most families in Washington live vary well on far less.

  11. YouBetCha Avatar

    Darn right will be moving our primary residence to another town. Some say its greed I say its ignorance. My family and I support the Seattle community, and our local community in financial ways that you can not even imagine. If 1098 passes we will set up our primary residence in another state (idaho) and those who will lose wont be my husband and I, but our local public schools, childrens hospital, the hutch, UW, and the list goes on….Do I feel like we should be taxed because of our hard work and success?. Is the amount of ones income up for discussion as far as how much more we should pay the government. I dont think so. Do you really think this wont funnel down to everyone else in due time?, and do you really trust your state government to make the right decision on how money is spent wisely. Unions are behind this and are the key players. Unions dont help our children in the public schools, they keep those who need to be out safe in a public position. If you spend a significant amount of time at your local school I’ll tell you for a fact you’ll see admin and educators who need to be sent with walking papers but are secure. Also, having a higher income does have it major benefits, but with that comes the downside. People judging you because of what you have and not by who you are.

  12. Asymptosis Avatar


    Darn right will be moving our primary residence to another town. Some say its greed I say its ignorance.

    I’d say you’re absolutely right. Couldn’t agree more.

    we will set up our primary residence in another state (idaho)

    Thanks for providing instantaneous evidence! If you’re a $350K earner, in Idaho you’ll pay approximately $26,966 in income taxes — 7.7% of your income. In Washington under 1098 you’d pay $7,500, or 2.1%. Sayonora, sucker.

    I’m certainly nobody to be judging rich people (I are one), nor do I. My arguments are from economic efficiency. (The beauty is that 1098 also resolves real inequity in the tax system — win/win.)

    If you’re feeling negatively judged by people, I’m thinking there are other reasons.

  13. Youdum Avatar

    Some real dummies here. Let me spell it out: the guys who make $20M will pay $1M. They pay all the property taxes and provide all the jobs for people like you and me. They even pay for all of the social programs for bloggers who don’t earn any income.

    When even ONE of those guys leaves the state, we lose hundreds of jobs and millions in taxes. And they will leave – they’ll go to sunny California, or Florida, or the New Hampshire border near boston, or any of the 40 states with 5% income tax.

    Zero taxes is a HUGE incentive for living in Washington. There is no Silicon Valley here, and if you take that incentive away the state will collapse. Take a look at Oregon’s latest brilliant tax hike for an example of what happens when you try to hurt “the rich”. You fools don’t realize that it’ll hurt you more than it hurts them.

    There is one tax hike I’d support though: there’s a section on your 1040 where you can volunteer to pay more tax than owed. Bill Gates Sr and Jr should feel free to pay 99% – that should provide enough revenue that no one else needs to be taxed.

    Sigh… there are only two kinds of liberals: those with no money (like you) and those with too much (like Gates). The first type are whiners, the second are arrogant, and both types are fools.

  14. Melanie Jackson Avatar

    Hello Stradale
    The legislature cannot legislate an abomination on anyone. This would have to be voted on by the people. Does that make a difference to you?

    It is not about hurting the rich. It is about helping the others of us survive. We should try to keep the drama and name calling out of these important topics and maybe we could come to a workable compassionate conclusion that helps everyone win.

    If you want so badly to not have to pay a fair share so that others can make ends meet, then I for one would love it if you moved to Idaho.

  15. Melanie Jackson Avatar

    One more thing…sorry. I am wondering why since everyone feels so strongly about this, that they have problem using thier names?

  16. Mary Avatar

    Asymptos, your response detailing that Idaho has a 7.7% income tax is true, which is indeed higher. What you have failed to take into consideration is that Idaho’s overall tax and fee burdon is significantly less than Washington’s (as are many other states aside from the ones you listed that have no income tax). When Wa passes this the overall tax burdon will jump even higher, making Idaho that much more appealing, or for that matter any of the many other states that will have better economic incentives.

    I’m a Seattle native that moved my family to Idaho years ago, and indeed left all of the above, as well as the traffic, bottom feeders, and bs behind. Nothing like selling an overpriced, overtaxed house and getting 20 acres with a larger house for 1/4 of the price (and half the taxes) along with an instant income increase.

    When I think of greed I think of the person that comes over for dinner and stuffs their face until the table is empty, not the person that went to work and bought all the food and doesn’t think the guest should be telling them how much they are allowed to eat…but that’s just me.

  17. Asymptosis Avatar


    1. Who said anything about greed? If you’re feeling defensive on that subject, it didn’t come from me.

    2. If property values are (profoundly) lower in Idaho, the all-knowing efficient market is here to tell you: it’s because people don’t want to live there.

    3. Re: “Idaho’s overall tax and fee burdon is significantly less than Washington’s.” More ignorance: The total Washington State tax and fee burden (2008) is 8.9% of income. In Idaho it’s … 10.1%.


  18. Mary Avatar

    “Who said anything about greed?” Read the comments of this thread. Several people mentioned it.

    Actually, people do want to live here. I live just off a resort town and our property values didn’t drop a dollar during this devastating crash, meanwhile my brother’s property in Seattle is worth 200k less than what he paid for it. OOPS.

    Although your basic assumption that the property values are low because no one wants to live here is a logical fallacy at best, and pure ignorance regardless. More people relocate here every year (whether we want them to or not). Our businesses are thriving and growing every year despite the terrible economy, however we have absolutely no plans of expanding to Spokane any time soon. There is just no incentive to do so unfortunately.

    You can call me ignorant and post bs from the tax foundation. I have the tax records from Seattle and the tax records from Idaho and know exactly how much money I’m saving. I admit, I made a generalization as far as Idaho’s is less than Wa’s, however Idaho vs King County+ Wa, Idaho comes out far ahead kiddo. When 1098 passes the gap will increase that much more.

  19. bex Avatar


    There is no Silicon Valley here, and if you take that incentive away the state will collapse.

    This doesn’t make any sense… Silicon Valley exists where the state income tax rate is between 1.25% and 9.55%. Washington is 0%, which still isn’t enough to entice Silicon Valley to migrate north.

    Essentially, this is all about trade-offs. It matters less what the tax rate is, and more what the state does with it. If it’s for schools, and police, and parks that enhance my quality of life, then I’ll hang around even if taxes increase. If they start building bridges to nowhere, then I’ll move elsewhere.

  20. […] All the gnashing of teeth and tearing of breasts about “the most productive members of our society” voting with their feet and abandoning our state if we institute an income tax has always seemed a little … overblown. […]