Seattle is proud to have its comfort food innovations showcased for the world. For Barack Obama this week it was highlighting Top Pot Doughnuts and Cupcake Royale. Those with memory will also remember Seattle swooning when Bill Clinton appeared on the street with a Starbucks cup.
Our food entrepreneurism is emblematic of quality of life. But cupcakes are not Boeing jets, Starbucks isn't software. The real economic symbolism game is being fought out in a kind of culture war over I-1098, the initiative that would tax high-wage earners and give some state tax relief to small businesses and property owners.
Some opponents of I-1098 argue that income taxes are part of a class war against the rich. But more than that, the argument is that such a tax will keep the next generation of wealthy individuals from moving to Washington. Microsoft executives worry that they won't be able to recruit top people; some venture capitalists worry that we'll interrupt the so called "virtuous cycle" of innovation, which is the opposite of a vicious circle. We'll chase away innovators and capital and lose the chance to incubate the next big thing.
That was part of the message of Matt McIlwain, a manager of Madrona Venture Group, a venture firm whose partners have helped launch Crosscut. McIlwaine argued against I-1098 during a recent meeting with Crosscut writers. (We've also met with Bill Gates, Sr., also a Crossut supporter, who is promoting I-1098.) When we pressed McIlwain for his alternative, a fairer tax solution that would keep Washington attractive yet fund an education system that is believed to be essential to innovation and technological advancement, McIlwain dodged, but finally allowed as how Texas and Florida have more business-friendly tax systems.
As if on cue, the Republican Governor of Texas, Rick Perry, piped up, and invited Washington companies to come on down. Perry has sent a letter to businesses saying, "As the State of Washington considers a multibillion-dollar tax increase for citizens and businesses...I invite you to consider your future in America's new land of opportunity: the State of Texas. If Washington doesn't want your business, Texas does. Texas has no personal income tax and no interest in getting one."
My advice for anyone who thinks the choice between Texas and Washington is a toss-up: take Texas. Please.
If making big money is your primary motivator in life, if you have a company that can thrive anywhere, there are much better places to make your pile. There are better tax havens, places with less regulation, and more bodies and natural resources to exploit. We're unlikely to compete on that basis.
The decision for people to move here (or stay) has never been an entirely rational one, and such decisions date back to the Oregon Trail, when pioneers divided between those who went to the land of milk, honey and gold (California), or those who chose what one described as the land of "the apple and the pine." Why would you choose planting an orchard over panning for gold? In the venture world, you wouldn't. But Northwesterners have tended to self-select for reasons other than the bottom line — always have.
I think that's one way in which the venture capitalists' anti-1098 arguments about innovation are off: because they imagine a system in which young smarties come from elsewhere for stock options and a pampered existence in a high-tech start-up, lured by low taxes, then become ensconced as privileged members of the "creative class," and eventually produce a big score for Goldman Sachs. It does happen.
But so does innovation in income-tax states, like Massachusetts and California. Just think how much occurs before big money ever enters the picture. There are plenty of suburban garages and college dorm rooms where real innovation happens.
One of our regional assets is an ability to encourage and nurture creative people without putting money-making at the center of existence. If the money proves to be there (think grunge), believe me, the money people will flock in to take advantage. But many creative innovations flow from people thinking outside the box of financial expectations and having the pressure of generating big returns for investors. The real "virtuous cycle" has non-linear, non-bottom line components.
The question is, what kind of a state, city, and region do we want? Do we want one that acts out of a more generalized sense of self-interest, or one that gets caught in a race to the bottom? If we're a state that emphasizes education and fairness, a clean environment and tolerance, it seems to me the money part takes care of itself, at least in providing a habitable home for people who really care about this place, people committed to living here. Or at the very least, it builds an environment where something other than lucre and status matters. It's not utopia, but it is about values.
The "virtuous cycle" also lacks many virtues. It often lacks the virtue of economic justice, funneling wealth to the few and driving up prices for everyone else. All the while, the wealthy have endless opportunities to dodge their responsibilities (see Microsoft's Nevada ploy) or foist their expenses and risk onto the taxpayers.
It also can run over things that should matter more, like commitment to place, family, and learning. Washington history has a strong thread of egalitarianism running through it, and I'd like to think that has often protected us from some of the pitfalls of greed and excess. I think the the two Bill Gateses are right on I-1098 in principle, and they clearly have deep local roots in our tradition of seeking fairness. I think Jeff Bezos, Steve Ballmer, and the Gov. of Texas have it wrong.
We can have progressive taxation and eat our artisanal cupcakes too.
