Could your city add income tax next? Coalition says time to fight back is now

SEATTLE - Could Seattle's income tax could spread to other cities and other income brackets?

That's the question from a coalition that launched a legal fight against the city last week. They say the so-called "tax on the wealthy'"will end up costing all of us.

Anti-income tax crusader and Seattle venture capitalist Matt McIlwain is leading the charge.

He says Seattle's income tax will crush our region's prosperity and send jobs elsewhere.

"We really have a competitive advantage here," McIlwain said. "The governor's own commerce department says that, and makes that claim in trying to attract more talent to our region."

Earlier this month, an ordinance passed the city council with a 9-0 vote to institute an income tax in Seattle.

It's a 2.25 percent tax on every dollar individuals earn over $250,000 and couples earn over $500,000. The new tax could raise as much as $140 million dollar per year to fight homelessness, build affordable housing, and invest in transit.

Supporters, like council member Kshama Sawant, say it's time to level the playing field when it comes to taxes.

"Washington state and Seattle has had a tax code that is absolutely punishing to the poor and working class and middle class people for decades," Sawant said  after the ordinance passed.

McIlwain has been joined by former Washington Attorney general Rob McKenna, who say state law bans cities from imposing income taxes.

State law says, "A county, city, or city-county shall not levy a tax on net income."

"If the court overturns 80 years on the question of income as property, then that could open the door to a statewide income tax," McKenna said.

McIlwain, a venture capitalist with Seattle's Madrona Venture Group has waged this war before.He lead a campaign back in 2010 to vote against Initiative 1090.  The campaign defeated the state's first-ever initiative to create an income tax.

This time the courts, not the voters, will decide the fate of the income tax.

"We're quite optimistic given those state statutes and the constitution of our state, that this is going to prove to be illegal," McIlwain says.