New and Revised Taxation Plans

By Don MacGillivray

With the Oregon legislature in search of more funding for public schools, various new or revised tax plans are being advanced. Democrats believe that a new tax of approximately $2 billion is necessary to adequately fund Oregon’s schools and the rest of the state budget.

More revenue is needed because the average spending per student in Oregon’s schools is $1,000 less than the national average and it would take $1 billion per year to bring Oregon to within six percent of this national average. If this were to become possible, fifteen states would still outspend Oregon’s schools.

Another factor is that the Public Employee Retirement System (PERS) debt is taking $1.4 billion away from what otherwise could be used to fund public education and this situation is slowly getting worse. In this legislative session, an alliance between labor and business is advocating for a solution to the educational shortfall with a significant tax increase.

The most popular method seems to be through a gross receipts tax based on business sales, similar to Measure 97, defeated in 2016.

In 2017, another version of this form of taxation was unsuccessful. Various committees in the Oregon legislature are attempting to find a formula that can be successfully passed by the voters in an upcoming election.

The discussion to reduce the PERS deficit is being suggested. Many hope a successful way can be found to fund Oregon Schools at the rate required to bring them above the national average while repairing the retirement system.

The Oregon legislature and organizations knowledgeable about Oregon’s tax structure believe the property tax system is broken. This has been discussed over the years while the situation continues to become worse, leaving Oregon’s school children as the losers.

However, there soon may be a solution to this dilemma proposed during this legislative session in Salem.

Voters adopted Measure 5 in 1990 to provide property tax relief for most taxpayers. Seven years later Measures 47 and 50, were passed and added to the Oregon Constitution to improve upon Measure 5.

These changes have grown to become unfair and inequitable to the majority of property owners. The basic problem revolves around differences between the property assessed value and its market value. These measures reduced the assessed value of properties so much that the annual tax payments have little relationship to the market value of the properties.

The assessed value cannot increase by more than three percent per year and the market value often increases by much more. When a property is sold there is a significant adjustment upward by the County, changing the assessed value to more closely reflect the real market value.

Therefore the same home that has not been sold on the market for many years will pay a much lower property tax than a property of a similar market value that recently has been purchased.

This difference in property taxes on the two homes can vary by several hundred percent and the difference usually increases over time.

The gap between real market value and assessed value has grown to be an average of thirty-five per cent statewide. Most of the older homes in the inner east side of Portland benefit from this situation.

Property tax revisions under consideration in the Oregon legislature would most likely improve Oregon’s tax system and school funding for everyone.

Metro is also seeking ways to fund a bond measure for transit and transportation to meet the needs of the Portland region, estimated to be $47 billion over the next twenty-five years.

If not addressed, streets and roads will become more congested and deteriorate further, negatively impacting Portland’s commercial enterprises.

Metro recently polled the electorate and found that the average household would support $200 million in additional taxes. A property tax levy of this magnitude could generate $2.2 billion.

One of Metro’s next projects is to find funding for the SW Portland Max line, in the planning for many years. All that is needed is funding to begin its implementation.

Last spring, Metro reported on new ideas on how to fund transportation. Already on the table were more common ways to increase revenue such as taxes on sales, property, business, and/or income. A local expert in the fields of economics and politics provided several ideas that may also be considered.

• $5 million could be raised by taxing luxuries such as jewelry selling for over $5,000 and fashion items more than $1,000.

• $18 million could be generated with an annual fee for properties left vacant or undeveloped as has been done in San Francisco, California.

• $19 million could be raised if the exponential increase in the use of personal, handheld smartphones were taxed.

• $90 million would be provided if people earning over $125,000 were taxed an additional 0.5 percent of their income.

• $147 million could be raised with a sales tax of 5 percent on food service in restaurants.

•  $300 million could be generated with a carbon tax of $10 per ton in the metro area that would help improve the environment and slow climate change.

The combined total of these is a little over half a billion dollars per year, only about a quarter of future transportation funding needs.

Of course, this still leaves other critical needs such as housing, education, public safety, social services, and healthcare underfunded.

No decisions have been made and discussions are ongoing. Whatever is decided will likely be on the ballot in November of 2020.

New and Revised Taxation Plans

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