The returns show State Rep. Jefferson Smith (D-Portland), former City Commissioner Charlie Hales and businesswoman Eileen Brady at very different levels of financial comfort—although all earned well in excess of the current Portland median family income for a two-person household of $58,400.WW asked a senior tax accountant not affiliated with any of the campaigns to review the returns. The accountant says nothing in terms of excessive deductions or an inconsistent approach jumped off the page on any of the returns, although the absence of some documentation makes a conclusive determination impossible.
Here is a brief review of the information the candidates provided:
Smith provided WW returns for the tax years 2010 and 2009. Smith earns $21,612 each year as a member of the Oregon House but as with all three candidates, the filing of a joint return makes it difficult to figure out who is paid how much in total salary and none of the candidates provided W2 forms. Smith's wife, Katy Lesowski is a research administrator at OHSU. Smith and Lesowski showed $96,198 in adjusted gross income in 2010 and $99, 448 in 2009. The couple, who married in 2009 and have no children, received a helpful one-time lump sum in each of the two years: $18,000 in 2009 from Smith’s late mother’s estate and $33,000 in 2010 from Lesowski’s grandmother’s estate.
As WW first reported last summer, Hales created a problem for himself (and saved some money) by claiming Washington residency for tax purposes in 2008 and 2009. Unlike Oregon, which has one of the nation’s highest income tax rates, Washington does not levy income taxes. The problem arises from Hales continuing to vote in Oregon, as records show he did, while claiming Washington residency. A taxpayer may own property in many states but the law says he can only claim one as his “domicile” for tax purposes. And Oregon law also says you can only vote here if you are a “resident of Oregon.” But Hales defined the state of residence for him and his wife, Nancy, as Washington. That meant he only owed taxes for those days he worked in Oregon. And although Hales nominally worked in Portland for the engineering firm HDR, he traveled extensively and attributed only about 7.5 percent of his income to Oregon in for 2008 and 2009. Hales reported adjusted gross income of $185,945 in 2008; $168,053 in 2009 and $212,180 in 2010. The tax returns he provided WW show that Hales saved him about $30,000 in Oregon income taxes for the two years he claimed Washington residency. In 2010, the issue became moot because Hales declared himself a resident of Oregon again.
Brady and her husband Brian Rohter reported $10,600,933 in adjusted gross income for the three most recent tax years. The vast majority of that money came in the form of capital gains from selling their stake in New Seasons Market. In 2003, three years after New Seasons launched, its founders, Stan Amy, Chuck Eggert and Rohter distributed some of their stock to family members, including Brady. The couple’s 2009 return shows that she sold $2 million worth of stock that year. Brady and Rohter benefited from the big difference in the federal tax rate on capital gains—15 percent—and the top rate for regular income such as wages—35 percent. Even with that benefit, over those three years, they paid $1.84 million in federal tax on their income, an effective federal rate of 17.3 percent. Some Oregonians who have known they were going to take large capital gains have chosen to move to Washington in anticipation of that event avoid state taxes (some mayoral candidates have moved there as well). The state of Oregon, however reaped rewards from Brady and Rohter's decision to stick around—the couple paid $1.062 million in state income tax over the three years, an effective Oregon tax rate of 10 percent.