There was a lot of chatter at the Technology Alliance’s luncheon today about the sorry state of education in Washington state — a common refrain at the annual tech gathering.
And while many agree that more money needs to go into the state’s education system, one proposal to raise much-needed cash certainly does not sit well with two prominent members of the Seattle tech community.
Madrona Venture Group’s Tom Alberg and Concur CEO Steve Singh both stressed their opposition to the idea of a capital gains tax in Washington state.
Democratic leaders in the state currently are pushing a new capital gains tax plan, one which would place a five percent tax on investment income and impact two percent of the state’s wealthiest families. The funds would help raise money for K-12 education, an area where the Tech Alliance said Washington state continues to lag peer states such as Massachusetts, Colorado and New Jersey.
But while Alberg and Singh said that Washington state’s tax system is in much need of reform, they stressed that a capital gains tax is not the answer.
“I think it dampens investment. I think it tends to focus on a one-year gain for an entrepreneur who starts a company,” said Alberg, who sits on the board of Amazon and bankrolls many startups in the Seattle area. “I don’t think it is the right way to approach overall tax policy.”
Singh, who just sold his Bellevue software company to SAP for $8.3 billion, was a bit more blunt when it came to the idea of a capital gains tax.
“No,” said Singh. “And here’s why: We have plenty of tax vehicles. If you want to raise the taxes, fine. Raise them within the tax vehicles that we have. Adding new taxes, in my view, what ends up happening in the way that our politics works today it would becomes massively, massively polarized, and we start beating up on members of society… Look, there has to be some discipline in how we run our state. I am not against paying more. I am all for paying more. I am all for investing more in education, and every other area. But you have plenty of other places to raise taxes.”
Currently, 41 states impose a capital gains tax.
Washington state also is one of the few states that does not impose an income tax. An initiative in 2010, I-1098, that would have imposed an income tax on the wealthiest residents in Washington state was soundly defeated.
Bill Gates Sr., who founded the Tech Alliance, was one of the most vocal proponents of the income tax. But many in the tech industry opposed the measure.
In an opinion piece in The Seattle Times earlier this week, State Rep. Laurie Jinkins, D-Tacoma, wrote that just 32,000 families in the state would pay a capital gains tax under the current proposal. The Democratic proposal calls for the five percent tax to be placed on individuals who bring in more than $25,000 in annual capital gains annually. ($50,000 for couples).
However, Jinkins — who called Washington state’s tax system unfair, backward and regressive — said the tax would raise about $1.2 billion for basic education and $490 million for higher education by 2019.
“It’s time to pass a capital-gains tax and build an economy that works for everyone, not just the wealthy few,” she wrote.