The news this week that Jeff Bezos plans to sell more Amazon stock is another reminder of the tech mogul’s move away from Washington state — and the debate over its capital gains tax.
A new regulatory filing shows that the Amazon founder plans to sell 25 million Amazon shares worth about $5 billion. This comes after he sold 50 million shares worth around $8.5 billion earlier this year.
Bezos announced in November that he was leaving his longtime hometown of Seattle, where Amazon is based, and moving to Miami.
The relocation sparked questions about Washington state’s capital gains tax, passed in 2021, which imposes a 7% tax on any gains of more than $262,000 from the sale of stocks and bonds. Florida does not have a capital gains tax.
Bezos saved more than $600 million by moving to Miami and avoiding Washington’s capital gains tax, CNBC reported in February, based on his sale of 50 million shares earlier this year.
With the sale of 25 million additional shares, revealed this week in a regulatory filing, Bezos will likely have saved close to $1 billion in total so far.
It’s a giant chunk of change that would have otherwise gone to the state of Washington.
The capital gains tax went into effect in 2022 and brought in $786 million in its first year, exceeding projections. More than half of the revenue came from just 10 people, Bloomberg noted. The first $500 million collected goes toward education and child care programs, while the remainder is designated for school construction projects.
However, in its second year, the capital gains tax generated $433 million from about the same number of returns (3,850), according to data shared by the state’s revenue office in May. It’s less than what was anticipated by the state, but lawmakers say they expected unpredictability with the tax, the Washington State Standard reported.
Asked about the lower revenues, the state’s chief economist said last week that taxpayers are “learning how to operate in the new environment,” according to a report by The Center Square.
The tax created controversy within the tech industry because it targets stocks, a key part of compensation for many startup founders and their employees.
Some business leaders warned that companies and people would leave Washington state due to the tax.
Washington Sen. Noel Frame, who has pushed for a state wealth tax, told GeekWire in November that she didn’t buy the narrative that wealthy people move to avoid paying high taxes, pointing to research that says otherwise.
Economist Cristobal Young published a study in 2016 that found most wealthy people don’t move to avoid paying high taxes.
Young, however, published another study in 2022 stating that “once pandemic restrictions arrived, households began questioning the value of living in expensive, high-tax states.”
We reached out to Sen. Frame for comment, and will update this story if we hear back.
In his post on Instagram announcing the move away from Seattle, Bezos said he wanted be closer to family in Miami and operations for his Blue Origin space venture. He did not mention taxes.
Jared Walczak, vice president of state projects at the think tank Tax Foundation, wrote in November that “a Washington state revenue official was probably moved to tears” with Bezos’ announcement that he was moving to Miami.
“And whether tax savings motivated his move or not, the implications for Washington are very real, and serve to illustrate just how dangerous it can be to design tax systems that rely so overwhelmingly on a very small number of taxpayers choosing to stay put,” Walczak wrote.
Washington has no personal or corporate income tax and generates most of its revenue through sales, property, and business and occupation (B&O) taxes. Critics say this regressive approach to taxation hits low-income individuals and households hardest.
Opponents to the capital gains tax had argued that it was functionally an income tax and therefore a violation of the state constitution’s strict rules on these taxes, while supporters said it operated as a sales tax and was therefore legal.
The tax was challenged in court. But the U.S. Supreme Court in January said it would not to hear an appeal of a Washington state Supreme Court ruling from March 2023 that found the statewide tax on capital gains to be lawful.
Initiative 2109, which would repeal the tax, recently qualified for the November ballot in Washington state.
Bezos controlled about 10.8% of Amazon’s outstanding stock, as of a February proxy statement. Bloomberg reported that he would still hold nearly 912 million shares, or about 8.8% of Amazon, following the latest sale.
Amazon’s stock is up more than 30% this year and more than 50% in the past 12 months, marking a big bounceback from 2022 amid the tech downturn. The company reached a $2 trillion market capitalization last week for the first time ever.
Bezos did not sell Amazon stock in 2022 or 2023. Amazon’s stock hit a record high this week.
Bezos is No. 2 on the Bloomberg Billionaires Index with a net worth of $222 billion, up $44.7 billion year-over-year on the strength of Amazon’s stock.
The billionaire’s ties to the Seattle region have diminished in recent years. Bezos and ex-wife MacKenzie Scott divorced in 2019 after 25 years of marriage, and he stepped down as Amazon’s CEO in 2021.
He remains chairman of Amazon, though his focus has shifted to Blue Origin. Bezos is also dealing with recent controversies and declining revenue at The Washington Post, which he bought in 2013.
Source
geekwire
