Deficits: The Battle Over Taxing The Rich

With Deficits Soaring, Washington State Is Considering A Special Income Tax For The Wealthiest Residents

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On Tuesday, voters will decide on Initiative 1098 that would create a state income tax, but only on the wealthy, of whom there are many: 133,000 millionaires and seven billionaires, including Bill Gates of Microsoft.

His father, Bill Gates Sr., has poured his own money into backing Initiative 1098.

The tax would bring in $3 billion a year, to be spent mainly on education, which has suffered cutbacks as the state reels under a massive deficit.

Washington is one of only seven states without any income tax. The proposal would create a five percent rate on income over $200,000 for individuals and $400,000 for couples; a nine percent rate kicks in at half a million dollars on individuals and a million for couples.

"Let's say a couple earns $500,000," Stahl said. "How much do you think they'll have to pay?"

"Well, they would pay $5,000, because that's five percent of the $100,000 on which they would pay," Gates explained.

"Oh, they would only pay on $100,000. They're exempt up to the $400,000," Stahl replied. "So they'd only pay on $100,000."

"Precisely," he replied.
"Well, that's not very much…if you earn that kind of money," Stahl remarked.

"Precisely," Gates replied.

His son Bill is on his side along with the public employees' unions. The other side is a who's who of the state's big businesses: Boeing, Amazon and even Microsoft.

Bill Gates is still chairman, but Microsoft CEO Steve Ballmer opposes the initiative, which is why they're calling this the battle of the billionaires.

"Is it awkward," Stahl said.

"The word awkward fits. Yes," Gates agreed.

Ballmer's side argues that the "soak the rich" tax would stifle high-tech innovation and lead to businesses moving out of the state. "60 Minutes" asked Microsoft, Amazon and Boeing for interviews but they all declined.

"Businesses are saying they'll leave," Stahl pointed out.

"Yes. But the real truth of the matter is that the people that own businesses are the people who will be paying the tax. And my analysis is they don't want to pay the tax," Gates said. "The rich guys don't want to pay the tax."

"Are you saying you just think they're greedy?" Stahl asked.

"No," he replied. "They're defensive. I guess you could call it greed, I suppose. Wanting to not write another check, sure," Gates said.

"Steve Ballmer?" Stahl asked. "He's worth $14 billion. You don't think he…"

"He's a very fine guy, too. The fact of the matter is there are 43 states in this country that have a state income tax. And in those states, the Microsofts or the ABCs, whatever, have not fled the state. I mean, it's just a gross exaggeration," Gates said.

But entrepreneur Bryan Mistele begs to disagree. "This initiative really is a nail in the coffin of small businesses and start ups in our state. It really impacts the tech community very heavily," he said.

"Nail in the coffin? You mean, kill it off?" Stahl asked.

"That's correct," Mistele said.