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After an uproar among high-income taxpayers, both Multnomah County and the Metro regional government waived interest and penalties for late payers of two new taxes, one to fund the county’s Preschool for All program and the other to pay for Metro’s supportive housing services measure.
Multnomah County Chair Jessica Vega Pederson announced an “amnesty” today for residents who owe personal income taxes for Preschool for All for 2021, waiving all penalties and interest. Any taxpayer who got a notice from the county and paid interest and penalties for 2021 will receive a full refund of both.
For even wealthier taxpayers who owe more than $1,000 for the year and are required to make quarterly payments, the county will waive interest for quarterly underpayments in 2022. All other penalties and interest associated with tax year 2022 and beyond will remain in effect.
“We appreciate the community supporting Preschool for All through this tax,” Pederson said. “This is a new tax for our region, and we want to give people room to pay it.”
Metro chief operating officer Marissa Madrigal, meantime, said the regional government will waive penalties and interest on late payments made for the first year of the housing services tax. More than 40,000 households paid their taxes by the April 18, 2022, deadline, but about 20,000 got late notices.
Both taxes went into effect Jan. 1, 2021, after voters approved them.
The Preschool for All program is funded by a personal income tax of 1.5% on taxable income over $125,000 for individuals and $200,000 for joint filers, and an additional 1.5% on taxable income over $250,000 for individuals and $400,000 for joint filers. The rate will increase 0.8% in 2026.
Metro’s supportive housing services program is funded by a 1% tax on all taxable income of more than $125,000 for individuals and $200,000 for couples filing jointly.
The Preschool for All and the Metro housing taxes are among the reasons that Portland has the second-highest tax burden in the U.S., at 14.69%, exceeded only by New York City at 14.78%, according to a report from Ernst & Young commissioned by lobbying group Oregon Business & Industry.
Several taxpayers contacted WW to complain about penalties and interest on the tax. The Oregonian reported on the problem earlier this month, and on similar issues with Metro’s homeless services tax.
“Media coverage of the new taxes was light to nonexistent during the several months prior to the April 15, 2022, deadline, so these ‘tax delinquents’ could perhaps be forgiven for not paying through ignorance,” Doug Holmgren wrote in an email to WW. “However, the Revenue Division is not so forgiving, as it is tacking on a stiff 25%-plus-interest penalty fine to the tax amount owed.”
Many taxpayers failed to pay the Preschool for All tax in 2021 because tax software products didn’t have the forms that users need to pay it. Last week, Eric Arellano, chief financial officer for Multnomah County, told commissioners that tax programs from H&R Block and Intuit, maker of TurboTax, didn’t contain the forms, which are unique to Multnomah County.
Others were “fell outside the tax communication efforts about these new taxes,” either because they did their own taxes or were “outside the geographic area,” the county said.
“In levying the first county income tax since 2003, we didn’t succeed in getting information to everyone who needed to hear it,” said Pederson, who pressed for Preschool for All as a commissioner before becoming chair. “We’re going to fix that.”
County Commissioner Sharon Meieran, a longtime critic of how the tax was implemented, said the amnesty was overdue.
“Waiving late fees and interest for all residents subject to the Preschool for All tax is the right thing to do,” Meieran said in an email. “It was the right thing to do almost a year ago when I first suggested it to the former chair. I’m glad the county is finally taking action, I just wish it had been taken sooner. A lot of needless frustration, anger and confusion could have, and should have, been avoided.”