Summarize this content to 2000 words in 6 paragraphs
Seattle entrepreneur, investor, and activist Nick Hanauer. (GeekWire File Photo / Kevin Lisota)
Seattle venture capitalist Nick Hanauer was a vocal supporter of implementing Washington’s capital gains tax, which passed in 2021 and funds the state’s public education budget.
But Hanauer feels a little different about the latest idea to tax wealthy people in his home state.
Hanauer, an early Amazon investor who frequently comments on economic justice and corporate greed, sounded off on a new wealth tax proposal from Washington Gov. Jay Inslee that would tax personal wealth above $100 million at 1%.
“This proposal is impractical, has serious legal issues, and likely wouldn’t survive a ballot challenge,” Hanauer wrote in a series of posts on X.
Hanauer’s criticism is notable given his support of the capital gains tax, which taxes profits over $262,000 made from the sales of stocks and bonds. It sparked controversy from some tech and business leaders who warned that such laws drive away innovation and entrepreneurs.
Hanauer also expressed interest in a previous wealth tax proposal in Washington in 2021, which did not ultimately pass, telling GeekWire at the time that “to drive economic recovery in Washington we have to raise revenue to invest in the people of this state, and the revenue needs to come from the wealthy.” And he has been a big proponent of raising the minimum wage.
But Inslee’s proposal doesn’t fit the bill for Hanauer, who co-founded Seattle software company aQuantive, which sold to Microsoft for $6.4 billion in 2007.
I fully support taxing the wealthy. I’ve been in the fight for progressive taxation for decades. I was a leading advocate for the WA capital gains tax & spent millions of dollars to pass & defend it. I am proud of that work. But I do not support Inslee’s “intangible assets tax”— Nick Hanauer (@NickHanauer) December 19, 2024
Even if it clears the legal, implementation & other challenges, it’s unlikely to raise much $ given every wealthy person I’ve spoken to in the last few days has said they will leave the state. I believe them. Thoughtful taxes don’t actually drive people away, boneheaded taxes do.— Nick Hanauer (@NickHanauer) December 19, 2024
Hanauer, founder of Seattle-based public policy incubator Civic Ventures, said that valuing illiquid assets — such as startup equity or artwork — is a “logistical nightmare” and has “failed every place it’s been tried.”
Others within the Seattle tech community aren’t thrilled about the proposal, given the potential impact on entrepreneurs, investors and startups.
“We’re still waiting for how it’s written, but if indeed it is based on unrealized capital gains it could completely destroy our entire innovation ecosystem,” Seattle venture capitalist Aviel Ginzburg told GeekWire this week.
A recent report from the Washington state Department of Revenue highlighted several potential administrative challenges with a wealth tax, including the complexity of valuing intangible assets.
Inslee, who is leaving office in January after 12 years as Washington’s governor, pitched the wealth tax as a way to help generate revenue for government programs and address a multi-billion dollar budget shortfall.
Washington has no personal or corporate income tax and generates most of its revenue through sales, property, and business and occupation (B&O) taxes. Critics say this regressive approach to taxation hits low-income individuals and households hardest.
“Washington’s strong economy has created extraordinary wealth for a few, while rapid growth and rising costs have made it harder for working families to piece together child care, housing and health care,” Inslee wrote in his budget report.
The state says the wealth tax would impact 3,400 residents and generate $10.3 billion over four years.
Several states have tried passing wealth taxes in recent years, including Washington, but none have been enacted. A federal proposal from lawmakers targets fortunes over $50 million and was re-introduced earlier this year.
Many countries have repealed wealth taxes due to high administrative costs, tax evasion, and low revenue generation, according to the report from the Department of Revenue.
Hanauer said he supports a “high earners’ tax and super-profitable corporations should be asked to pay more.”
“We have to work together to find practical solutions to the budget shortfall,” Hanauer wrote. “We need to do what we did with capital gains: build a big tent that supports practical revenue solutions. This is not that. I am super disappointed.”
Previously: Wealth tax proposal in Washington state reignites debate over taxes and tech talent migration
