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Nick Hanauer
Nick Hanauer

Seattle venture capitalist Nick Hanauer was one of the most vocal supporters last year of Initiative 1098, a measure that would have raised funds for public education in Washington state by imposing a state income tax on those making more than $200,000.

Most of Hanauer’s peers in the venture capital and tech community absolutely hated the idea (including Madrona’s Matt McIlwain, Microsoft CEO Steve Ballmer), and I-1098 went down in flames.

But Hanauer, who has been described as a “high-functioning contrarian,” isn’t giving up on floating some of his ideas about economics and public policy. In a guest post that ran on Bloomberg earlier this month, the early investor in and the original backer of aQuantive wrote that there’s been a misperception floating around for years that rich people like him are “job creators”

But Hanauer, a co-founder of Second Avenue Partners, says the real job creators are middle class consumers who have enough money to buy more things. He writes in the editorial:

When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

Hanauer’s attack on the super rich is winning kudos from none other than former Wall Street analyst-turned-new media-titan Henry Blodget, who penned a column titled: “Finally, A Rich American Destroys The Fiction That Rich People Create The Jobs.”

Blodget echoes Hanauer’s points, and concludes:

“Rich people don’t create jobs. Our economy creates jobs. And until we return to more reasonable tax policies that help the 99% instead of just the 1%, our economy is going to go nowhere.”

This was the crux of I-1098, which was one of the more fascinating political battles I’ve watched unfold in the state since my arrival here more than 15 years ago. As part of my coverage of the issue, I interviewed both Hanauer and McIlwain, whose firms are located just a couple blocks from one another in downtown Seattle.

In the end, voters turned against the income tax in part because of arguments that it would eventually expand beyond the wealthy to all residents of the state.

But Hanauer is still proudly waving his “tax-me-more” flag, noting in the Bloomberg column that taxing the top one percent of earners in the country could provide cash to bankroll schools or critical infrastructure.

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