By Madeleine Voth
A proposal to reform one of Portland’s most obscure and controversial taxes, the Arts Tax, could soon alter how arts programs and education are funded across the city.
Approved by voters in 2012, the unique $35 annual flat tax, known as the Arts Tax, helps restore arts teaching positions in local schools and support local artists and arts nonprofits. Today, it generates about $12 million per year, with much of the revenue paying teacher salaries and the rest supporting grants to nonprofit arts organizations and individual artists.
But mounting administrative costs, inflation-driven declines in purchasing power and ongoing frustration with the tax’s collection system have led city leaders to re-evaluate whether the program still works as intended.
Portland City Council President and District 1 Councilor Jamie Dunphy said he plans to introduce a package of reforms aimed at stabilizing arts funding while making the tax easier and more equitable for those who pay it. “This is a unique system,” Dunphy said. “Historically, city government hasn’t been directly involved in funding school arts teachers. But voters stepped in when districts were facing cuts, and now we have to make sure the system still works.”
Unlike many other local taxes or fees, Portland’s Arts Tax has remained unchanged since its adoption more than a decade ago. Because it has not kept pace with inflation, Dunphy said the program’s purchasing power has steadily declined. After required payments to schools are made, fewer dollars remain for arts grants, contributing to a roughly 45 percent reduction in funding available to arts organizations this year.
The tax is also costly to administer. Initially expected to consume about 10 percent of annual revenue in collection costs, that share has grown closer to 20 percent in recent years, according to Dunphy. “It’s increasingly expensive to collect, and it’s returning fewer dollars to actually fund both teachers and the arts,” he said.
Further, the city employs only eight revenue collectors to track payments from Portland’s roughly half-million residents, and because the tax must be paid separately from state or federal income taxes, many residents either fail to pay on time or are unaware of the tax requirement altogether.
Dunphy’s proposal includes several potential reforms designed to address these issues.
One element would distribute approximately $3 million from an existing reserve within the Arts Tax fund to nonprofit organizations over the next two years to help offset recent grant reductions. The reserve—estimated at about $9 million—was built from early collections that could not immediately be spent due to program limitations at the time, and has been kept as a rainy day fund.
The proposal also includes administrative changes intended to improve compliance and fairness. Possible measures include integrating payment options into commonly used tax-filing software, exempting residents below certain income thresholds, increasing the fee for higher-income earners and linking the tax to inflation to prevent future erosion in value.
Additionally, Dunphy said he is exploring the creation of a new revenue stream through a modest fee on streaming service subscriptions, modeled after a similar policy adopted in Chicago. The fee would be collected from companies such as Netflix and Disney+ and used to support arts programming and other initiatives connected to cultural activity in the city.
“If we want a vibrant economy and thriving small businesses, we have to get people out into the public square,” Dunphy said. “Investing in the arts is one of the biggest tools the city has to make that happen.”
Local arts leaders say even modest changes to Arts Tax funding can have significant effects—particularly for organizations working in SE Portland.
The Portland Street Art Alliance (PSAA), which has received General Operating Support (GOS) grants funded by the tax for several years, relies on that funding to sustain core operations that support art programming throughout the city.
In SE Portland, the organization plays a key role in stewarding and expanding the Central Eastside Mural District. Its work includes activating community art walls, hosting educational mural tours and providing opportunities for emerging artists to create publicly accessible artwork.
Executive Director Tiffany Conklin said flexible operational funding has been essential to maintaining those programs. “GOS funding has been critical for PSAA. It directly supports our operations, staffing and our ongoing mural maintenance program,” Conklin said. “Without it, we just couldn’t sustain the infrastructure that makes all our programming possible.”
Moreso, for small and mid-sized nonprofits like PSAA, Conklin said that reliable operational funding can determine whether programs continue to expand or begin to contract. “For organizations like ours, even modest reductions can mean fewer programs, smaller community reach and lost opportunities for artists,” she said.
While arts leaders are closely monitoring the City Council’s reform discussions, Conklin emphasized that Portland’s identity as a creative city depends on sustained investment in the organizations that bring art into public spaces.
“Public art is not a luxury,” Conklin said. “It’s a tool for community building, economic vitality and civic pride. We hope our city leadership will protect and grow the infrastructure that supports it.”
Looking forward, Dunphy said he hopes to present an initial policy preview in April while gathering feedback from arts groups, educators, businesses and residents, with the ultimate goal being to implement changes in time for the next calendar year.
Although many officials agree that reforms are needed, any formal changes would require approval from the full City Council.
“If changes don’t happen,” Dunphy said, “there’s a real risk the tax could disappear altogether. People in Portland love the arts—they just don’t love the way this tax works.”
Portland Street Art Alliance project in the Central Eastside Mural District. Photo by Portland Street Art Alliance.
