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Madrona Venture Group Managing Director Matt McIlwain. (GeekWire Photo)

Washington state’s lack of income tax is either one of its greatest assets or one of the main issues holding it back economically, depending on who you ask.

State income tax continues to be a hot button issue in Washington, years after voters defeated Initiative 1098 in 2010. The initiative lost by a two-to-one margin, and it would have instituted a state income tax on people making more than $200,000 a year and couples making above $400,000 a year. It came up several times at the King County Economic Development Council’s annual Economic Forecast Conference Thursday. 

Chris Mefford, president and CEO of Community Attributes. (GeekWire Photo / Nat Levy)

Chris Mefford, president and CEO of Seattle consulting firm Community Attributes said that Washington’s tax system, which has been called the most regressive one in the nation and relies primarily on sales tax, business tax and property tax, is broken. He encouraged the state Legislature to look at an income tax to increase the diversity of revenue sources in the state.

“I believe it is mathematically impossible to succeed fiscally without a state income tax,” Mefford said.

In the following session, Madrona Venture Group Managing Director Matt McIlwain disagreed with Mefford, saying that he hears all the time from people moving in from out of town to work at big tech companies and found startups that they are happy not to have a state income tax. He cited Seattle Seahawks tight end Jimmy Graham saying one of the biggest benefits of coming to Washington was its lack of income tax. McIlwain said the state’s primary tax sources, property and sales tax, as well as business and occupation tax have filled up state coffers well.

“We have a tax revenue problem, and the problem is what are we going to do with all the incremental tax revenue we have received from our three primary sources,” McIlwain said.

California is known for having much higher costs than Washington, including taxes and costs of living. At the forecast, Carl Guardino, CEO of Silicon Valley Leadership Group, said one of the state’s main revenue sources, the gas tax, is losing buying power as vehicles become more efficient. He said that has caused most major investments, specifically in transit to be funded through income and sales tax initiatives.

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