Study Shows Multnomah County Will Have Nation’s Highest Income Taxes for High-Income Earners if Preschool Measure Passes

If other measures pass, Oregon’s business taxes would also go from 40th in nation to 19th.

Kachka Alfresca. (Brian Burk)

Multnomah County voters are being asked to pay a lot of taxes on the November ballot: Metro's $4 billion transportation measure; a $1.2 billion of an existing Portland Public Schools bond; a $387 million Multnomah County Library bond; a $239 million Portland Parks & Recreation operating levy; and a Multnomah County tuition-free preschool measure that would raise $133 million next year and grow from there.

That's a lot of tax measures, coming on top of previously passed Metro housing and homeless services bonds and a statewide corporate activities tax lawmakers passed in 2019.

Proponents of each of those taxes can make convincing cases for why they deserve support (and WW has endorsed a "yes" vote on each, except for the Metro transportation measure.)

But the taxes add up. Oregon Business & Industry, which represents the state's largest employers, wanted to know what the cumulative effect of them would be.

The short answer: If Multnomah County's Preschool for All measure passes, county residents who make more than $250,000 a year will pay the highest personal income taxes in the nation.

That's the finding of a study OBI released today. The organization hired Ernst & Young to do the analysis for the State Tax Research Institute. (The homeless services measure that passed earlier this year will add 1%; the preschool measure will add up to 3% to Oregon's top personal rate of 9.9% (1.5% for people who make over $125,000 and another 1.5% for those who make above $250,00).

(Note: OBI says the .7 percent included in the local rate is the employer-paid TriMet payroll tax.)

Oregon has historically had very low taxes on business, but the property taxes (parks, schools, libraries) and payroll tax (Metro transportation measure) on the November ballot would add to a slew of other new taxes in the past couple of years to increase the combined tax rate on businesses from 40th in the nation to 19th. The total tax burden on businesses would increase 40% from the beginning of 2019 to the end of 2021, if all measures pass.

It would also vault Oregon ahead of California and Idaho in terms of total corporate tax bite, Ernst & Young found.

"In our 18 years of producing an annual analysis of state and local business tax burdens across the country, we've never seen a state jump so far and so fast in our rankings," said Doug Lindholm of the State Tax Research Institute. "Unprecedented state and local tax increases have shifted Oregon from a modest business tax burden state to a high business tax state above the national average and higher than Idaho, Washington and California."

Daniel Hauser, an analyst at the left-leaning Oregon Center for Public Policy, says he's just begun looking at the new report but has concerns it might be overstating the tax burden. Hauser notes, for instance, that state officials have significantly reduced their expectations for the new corporate activities tax passed last year, from $1.1 billion a year to about half that, at least for the next two years.

"More importantly, the report completely ignores the benefits businesses and Oregonians will receive from these investments," Hauser adds. "The revenue raised allows Oregon to improve our education system and have a healthier, more productive workforce. That's good for all Oregonians, including businesses. That's why many businesses support these tax increases, even if some of them will pay a little more in taxes."

But Sandra McDonough, president and CEO of OBI, says the tax increases could make it less attractive for companies to operate or expand here. (OBI supported the Metro homelessness measure but opposes the Metro transportation tax. It has not taken a position on other taxes on the November ballot.)

"Oregon and Portland metro compete with states and metro regions across the country for new job development, and especially with our fellow Western states," McDonough said. "Cost matters. This increase in business tax burden is significant and has the potential of making it harder for our state to grow new jobs—and recover from this recession—if we don't put the brakes on new taxes."

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