The long struggle over taxing the rich

The State Innovation Exchange and State Revenue Alliance, two national groups now helping to coordinate state wealth-tax efforts, are outspent by billionaire-funded organizations that argue for yet more cuts.

“The reality is wealthy people across this country wield enormous political power in terms of lobbyists, think tanks and organizations created to entrench their financial advantage,” said Kyle Huelsman, senior director of legislative affairs at the State Innovation Exchange.

“We are really in a generational fight, and an incredibly disproportionate fight in terms of resources.”

In the United States, though, proposals for a tax on the ultrarich, including from Democrats Sen. Elizabeth Warren of Massachusetts and Rep. Pramila Jayapal of Washington have stalled in Congress. That’s despite polling showing that the majority of Americans support the concept.

And in the past two years, at least 19 states have lowered their income taxes in ways that primarily benefit their most well-off residents, pushed along by conservative groups that include the State Policy Network.

All of that is energizing legislators and activists in Democratic-led states to band together to try to increase taxes on the wealthy—in some cases with actual wealth-tax proposals. 

On Jan. 19, elected officials in eight states—Connecticut, New York, California, Washington, Hawaiʻi, Maryland, Illinois and Minnesota—introduced legislation or held rallies for bills filed afterward. It was the first public effort of a movement organized by State Innovation Exchange and State Revenue Alliance to move the needle on tax parity. 

“The same people and organizations who patiently packed the courts with judges who would take away our rights are the same who are making it harder to raise revenue for what our communities need,” Kristen Crowell, executive director of the State Revenue Alliance, said in an email. “For them, it’s a business decision—spend millions to avoid paying billions in taxes. For us, tax justice is woven into the fight for democracy, racial and economic justice.”

In Washington state, “we live and breathe the regressive tax system every day through the many different ways we’re seeing our communities facing decades of disinvestment,” said Firelands’ executive director, Stina Janssen.

The nonprofit’s workers and volunteers sought to change that. They wanted to see investment by the state—one of nine without an income tax—that would usher in more affordable housing and public child care.

Tax policy has been “used as a weapon against overburdened communities, especially the Black community,” said Sen. Joe Nguyễn, a Democrat who represents a Seattle-area district. “So for me, our tax structure is rooted in racism, is rooted in economic division, but it’s also a way for us to heal some of that from the past as well.”

Efforts in the early 2000s again fell short, including a ballot measure for a tax on the wealthy that failed after two of the state’s wealthiest residents helped fund the opposition in 2010. 

A decade later, Firelands and other tax reform proponents set their sights on capital gains. This time, they aimed for a clear message and strong public support. 

The 2021 bill filed from that effort called for levying a 7 percent tax on profits exceeding $250,000 from the sale and exchange of assets such as stocks and bonds. Lawmakers earmarked the revenue for early childhood education. 

More than 100 groups, including labor unions, human service organizations and immigrant rights nonprofits, teamed up to push the legislation forward. As soon as the Legislature passed it, several Washington residents represented in part by a State Policy Network affiliate, the Freedom Foundation, filed a lawsuit challenging the policy. 

But this time, when the case reached Washington’s high court, its ruling allowed the tax to stand. 

As of May, the state had raised more than triple the expected amount, with nearly $850 million collected from 3,190 payments. The first $500 million of annual revenue will go toward child care and early learning programs. The remainder will fund school construction. 

Those results inspired advocates in Hawaiʻi, one of the states where wealth tax and capital gains tax legislation was proposed this year.

“We can point to that and say, ’Look at this huge success,’” said Will Caron with Hawaiʻi Appleseed Center for Law & Economic Justice.