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Metro’s seven-member council will consider changes to the regional government’s supportive housing services levy that would exempt more of a taxpayer’s income by indexing the threshold that triggers the tax to inflation.
The council will hold a first reading on the ordinance June 17 and may vote on it June 26, according to a report by Metro staff that recommends councilors pass it.
The ordinance is a response to concern among taxpayers that inflation—high in recent years—is pushing middle-income people into income brackets that require paying a tax that was meant to be levied only on high earners. Single payers don’t owe the 1% tax on any income below $125,000. Married couples are exempt up to $200,000.
“A wide variety of partners and stakeholders agree that while the SHS personal income tax was intended to focus on high-earning households, inflation since the passage of Measure 26-210 means that increasing numbers of households are finding their income subject to the tax without a commensurate increase in purchasing power,” the staff report says.
Indexing the tax to inflation means that fewer households are likely to pay it, but that won’t cut collections by much, Metro staff wrote.
“The relative revenue impact of indexing the income exemption threshold is expected to be modest, as the majority of SHS personal income tax revenue is received from households with incomes well beyond the current exemption levels,” staff wrote.
Metro staffers said they didn’t see any opposition to the new ordinance.
“Although some partners have raised concerns about the revenue impacts of the ordinance, as well as other supportive housing services reforms that council is considering, staff are unaware of significant opposition to this ordinance at this time,” staff wrote.
Passed by voters in Clackamas, Multnomah and Washington counties in 2020, the SHS tax collected far more than forecast in most years, irking many payers who didn’t see enough progress on ending the Portland metro area’s homelessness crisis.
For the past year or so, the Metro Council has been considering a plan to send the matter back to voters for adjustments. Among the proposed changes: collect the tax until 2050 instead of sunsetting it in 2030; adjust the thresholds for inflation; and cut the tax to 0.75% in 2031.
Metro leaders had hoped to put the changes on the ballot in May, but debate and opposition kept them from hitting that deadline. Since then, they’ve been aiming for November.
The more modest changes in the new ordinance wouldn’t require approval by voters. If passed, indexing the tax would begin in the 2026 tax year, staff said.
The ordinance is also aimed at cutting red tape. As it stands, taxpayers who owe $1,000 or more must estimate their payments and make them quarterly. Many payers who thought they didn’t make enough money to meet the threshold have had to pay penalties and interest, Metro staff wrote. The new ordinance would eliminate estimated payments for any tax bill under $5,000.
“Increasing this minimum to $5,000 will reduce the administrative burden for the vast majority of personal income tax filers with little to no impact on revenue for the program,” staff wrote.
If the ordinance passes, Metro said it would publish the new thresholds for payment by Nov. 15 of each year. While inflation can push the threshold up, deflation can’t push it back down, Metro said. If price indexes fall in a given year, the exemptions would remain at the previous year’s level.
Metro would work with the city of Portland’s Revenue Division “to notify taxpayers, accounting and tax software firms, employers and so on about annual adjustments to income exemption levels, as well as changes in estimated payment requirements,” Metro staff wrote.
And, if Metro does seek an extension to the tax from voters and the extension passes, the annual indexing of the exemption threshold would last as long as the extension, staff wrote.