Washington State Rejects Income Tax on Wealthiest Residents

Washington state voters rejected a ballot measure to impose an income tax on the wealthiest residents that pitted Bill Gates Sr. against Microsoft Corp., the company co-founded by his son.

The income-tax measure, Initiative 1098, failed 65 percent to 35 percent, with 59 percent of precincts counted, according to the Associated Press.

The elder Gates was a lead advocate for the proposal. Redmond, Washington-based Microsoft, the world’s largest software company with about 90,000 employees, opposed the plan.

The proposal would have imposed a tax on the adjusted gross income of individuals earning more than $200,000 and couples earning more than $400,000, beginning in 2012.

“Those to whom it would apply are people who have not been called upon to pay their fair share of the costs in the state,” Gates, 84, said in an Oct. 27 conference call with reporters.

Washington is one of seven states, including Florida and Nevada, that don’t have income taxes, according to the Denver- based National Conference of State Legislatures.

Brad Smith, Microsoft’s general counsel and senior vice president, said the measure would make it harder to attract employees and stifle job growth.

High Tax Rate

“This initiative would give Washington one of the top five highest state income-tax rates in the country,” Smith said in an Oct. 27 e-mailed statement.

Other opponents, including the Washington Farm Bureau and the Association of Washington Business, said the Legislature could extend the income tax to everyone after two years.

Bill Gates, co-founder of Microsoft and the richest American, supported the initiative.

The measure would have increased state revenue by $11.2 billion over five years that would have been directed to education and health services, according to the state’s Office of Financial Management. It would have cut the state portion of property taxes by 20 percent and would have raised the business and occupation tax credit to $4,800.

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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