Afternoon Jolt: 1098 Debate

By Afternoon Jolt October 1, 2010

Today's Loser: Bill Gates Sr. and the Yes on 1098 campaign

High-earners' income tax proponent Bill Gates Sr. seemed to be on fire last night. As far as sound bites, Gates dunked on his debate opponent Matt McIlwain and McIlwain's debate partner Republican State Sen. Joe Zarelli (R-18, Ridgefield) all night. In response to a comment that business would move out of state if 1098 were implemented, Gates said: "Where are they gonna go? Wyoming?"

He also effectively described 1098 as a minimal, short-term effort:

"In this world, when you make your shopping list for what you'd like to spend your money on, you get, say, 12 items, and five of them are provided by your society. Police, courts, schools, colleges, roads. Now, we're in a jam and we need to do something dramatic. So we're taking from the lowest 20 percent, a little piece of what they're paying in taxes, and moving it over to the other side, this top group. It's not reform. That's all we're doing."

But for all that, he technically lost the debate. A poll taken by people who were watching the debate at home showed that at the beginning of the debate 48 percent supported 1098, and 42 percent didn't; at the end, 42 said supported 1098 and 52 said no. (The poll taken by the audience showed that 1098 increased in support from 49 percent to 56 percent, but that all those votes came from people who were "unsure" before"—no changed minds from the "Nos.")

Today's Winner: Matthew McIlwain and the No on 1098 campaign

At last night's I-1098 debate, Matt McIlwain of the Madrona Venture Group turned to 1098 debate into one about business, pointing out repeatedly the effects 1098 would have on "small businesses."

A lot of the time, the anti-1098 folks come out with their first argument, which doesn't really work: They say 1098 would dispel large corporations, where upper management types are attracted by the fact that Washington doesn't have an income tax. That's a weak argument because there's lots of things the draw corporations here—What's up, UW? Oh hey, one of the highest-educated populations in the country—and 43 other states have income taxes, too, so companies that want to move don't have a ton of options. It's an easy argument for the 1098 folks to slap down. (There's also the fact that most people aren't losing sleep over upper management.)

So it was smart of McIlwain to stick with argument No. 2: That 1098 would be burdensome for small S Corporations, where the company's income and the owner's income are one and the same (think of local music venues or law firms, where the partners often split up all the firm's income. We wrote about this whole issue last month).

McIlwain framed the debate, forcing the pro-1098 side to argue against that claim all night.

Even in their closing arguments, the pro-side was bogged down addressing that claim. Gates' debate partnner, Greater Seattle Business Association director Louise Chernin addressed it (which she did pretty well, actually—an S Corp would have to have over $400,000 in profits to be affected ... "It would be a very small number of businesses that would be affected.")

But still, they were on the defensive, not the offensive. That's not where you want to be when you're pushing an initiative.
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