Seattle venture capitalist Matt McIlwain’s non-profit sues city over income tax on high earners

GeekWire
By Monica Nickelsburg
August 9, 2017

A non-profit founded by Madrona Venture Group Managing Director Matt McIlwain is filing a lawsuit against the City of Seattle over a new plan to levy an income tax on its wealthiest residents.

McIlwain launched the Opportunity for All Coalition earlier this month to fund legal challenges to the income tax, which he says is “illegal” and “unnecessary.”

It will be the second legal challenge to the income tax filed Wednesday. Another group of Seattleites filed a separate complaint over the income tax, with backing from conservative think tank The Freedom Foundation. Prominent Seattle property owner Suzie Burke, businesswoman and activist Faye Garneau, and Microsoft lawyer Gene Burrus are among the plaintiffs.

The legislation in question would levy a 2.25 percent tax on any income that is above $250,000 for individuals and $500,000 for high earners. For example, a Seattleite earning $300,000 annually would be subject to a 2.25 percent tax on $50,000. The City Council passed the ordinance with the expectation that it would be challenged in court, as Washington state law says, “a county, city, or city-county shall not levy a tax on net income.”

“The tax is illegal based on state law, including no state authorization for local income taxes and a specific state law that prohibits local net income taxes,” McIlwain told GeekWire in an email Wednesday.

In 2010, Washington voters defeated Initiative 1098, which would have instituted a state income tax on people making more than $200,000 a year by a two-to-one margin. It’s a controversial issue in a region facing record growth, in part because of the bustling tech industry which has added thousands of high-paying jobs.

The Opportunity for All Coalition is filing today’s lawsuit on behalf of several individuals, according to McIlwain. As Madrona’s managing director, McIlwain invests in a wide range of software-focused companies, like Accolade, Extrahop, Qumulo, and Smartsheet. He also sits on the board of the Fred Hutchinson Cancer Research Center and Washington Policy Center.

“I believe there are times when you need to serve your community,” McIlwain told GeekWire when the Opportunity for All Coalition launched. “In defeating the city income tax, we can help maintain a system of opportunity and job creation for innovators and workers.”

I believe there are times when you need to serve your community. In defeating the city income tax, we can help maintain a system of opportunity and job creation for innovators and workers.

McIlwain has long been an outspoken critic of implementing an income tax in Washington state. At a conference in January, McIlwain said the state’s existing revenue sources are sufficient and argued that the absence of an income tax attracts tech talent to the region.

Read the full article here.