Billionaire effect: Did Paul Allen’s death just hit Washington’s education budget?
The late Microsoft co-founder Paul Allen may have just made another contribution to his home state of Washington.
But this wasn't a new initiative at his company Vulcan, or a gift from his various foundations. Rumors are flying in Washington that Allen's $26 billion fortune was behind a conspicuous $300 million spike in estate tax revenue that surfaced Wednesday in a report from the state's Economic and Revenue Forecast Council.
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Officials at a half-dozen state agencies and legislative offices refused to answer Protocol's questions about whether Allen — or someone else — was the source of the increase, citing privacy laws.
The new state report said only that the budget stands to benefit from "higher-than-forecasted estate tax receipts." Lobbyists and think-tank staffers who keep a close eye on the budget speculated that the timing was right, and that an estate as large as Allen's could cause that kind of bump.
"I had the exact same thought — was this Paul Allen's money finally washing through?" said Andy Nicholas, a senior fellow with the nonpartisan Washington State Budget & Policy Center.
Allen died in October 2018 at age 65 from complications of non-Hodgkin's lymphoma, but "it can take years" for estate taxes to hit state coffers, Nicholas said.
Washington's annual budget is around $27 billion, but large estate tax bills could help fill a void in a state grappling with how to capture revenue from its wealthiest residents as income inequality grows.
"It's very small, relatively, unless you have, you know, billionaires dying," said Marilyn Watkins, policy director for Seattle's Economic Opportunity Institute. "Of course, they don't publish that. All of that is confidential. One can certainly speculate if a very prominent billionaire dies."
"We have to be very careful that we don't go off just spending money," state Sen. John Braun said during a Wednesday hearing on the revenue report. "A big chunk of this is one-time money."
No one at the hearing, including Braun, mentioned Allen or any other wealthy residents whose estate tax bills might have come due.
The estate tax money, whatever the source, will go to a trust for early childhood education, public school improvements and college financial aid. The unexpected 33% increase in the trust's two-year budget, from just under $1.1 billion to more than $1.4 billion, comes as policymakers in the otherwise low-tax state are scrambling to address mounting income inequality. Moreover, the state has been under pressure from courts and teachers' unions to improve funding for public schools.
Spokespeople at the state Economic and Revenue Forecast Council, Office of Financial Management and Department of Revenue all declined to comment. "There are laws about what we can release about confidential taxpayer information," said Mikhail Carpenter of the Department of Revenue.
A spokesperson for Allen's primary wealth distribution apparatus, the for-profit Vulcan Inc., said the organization does "not comment on the Paul G. Allen estate."
The sudden jump points to broader questions about how the tax code applies to billionaires who have animated political debate across the nation. In Washington, the nation's most aggressive estate tax, often referred to as a "death tax," tops out around 20% and is "a bright spot" in an otherwise dark picture for advocates of increased social services spending, Nicholas said.
The Washington estate tax, which applies to people with more than $2 million in assets on a sliding scale, was added during a Bush-era political battle in the state that famously has no state income tax. Washington relies heavily on regressive sales and property taxes — an "upside-down" tax structure, economic liberals say, that has led to mounting pressure in recent years for new business taxes on mega-employers including Microsoft, Amazon and Starbucks.
The amount of state revenue captured for every $1,000 earned by Washington residents has decreased as the state's tech economy has grown, data from the state Office of Financial Management shows, from $158 of state revenue per $1,000 earned in 1997 to $145 in 2017.
"We've seen incomes for not just the top 1%, but the top 10%, humming along really nicely," Watkins said. "We're not capturing any of that."
Allen, like several other area billionaires, had signed a pledge to give away half his wealth — a figure that would conservatively amount to at least $10 billion. The task of divvying up that money has fallen to his sister, Jody Allen, with whom he ran Vulcan, which describes itself as a "the engine behind philanthropist and Microsoft co-founder Paul G. Allen's network of organizations and initiatives."
Allen was America's 21st-richest person when he died, according to Forbes, which at $20.3 billion pegged his net worth lower than other estimates. He accumulated his fortune through pursuits in fields ranging from real estate to commercial space travel to professional sports teams like the Seattle Seahawks.
Exactly what would become of Allen's wealth has remained a mystery, as the Oregonian has reported, because of Allen's commitment to giving away so much of his money and the logistical difficulty of unraveling his "expansive collection of businesses, investments, properties, world-class art and other eclectic and valuable assets."
The estate tax payment wouldn't be the only notable posthumous financial news for Allen this week. His 18,000-square-foot mansion in the Silicon Valley town of Atherton sold for $35.2 million, below an asking price of $41.5 million.