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The Multnomah County Board of Commissioners voted to delay a planned increase in the Preschool for All Tax for one year to comply with Gov. Tina Kotek’s call to avoid local tax increases for three years.
Approval of the delay was expected because County Chair Jessica Vega Pederson supported it, saying that the delay wouldn’t compromise the program’s aim to provide universal preschool by 2030.
The program is funded by a personal income tax of 1.5% on any 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. Those rates were set to increase by another 0.8%, to 2.3% and 3.8%, in 2026. The vote today means that the increase will be put off until Jan. 1, 2027.
But the board shot down a proposal by Commissioner Julia Brim-Edwards to index the preschool tax to inflation. Because the purchasing power of the dollar tends to sink slowly over time, and companies often adjust wages to compensate, more people will hit the Preschool for All thresholds over time.
By indexing the tax, the thresholds for payment would rise annually, based on the inflation rate. For example, if the tax had been indexed from the beginning in 2021, the 1.5% rate would now kick in at income above about $140,000, not $125,000, according to county estimates.
The lack of indexing means that the tax, meant to be paid only by high earners in the county, will hit more middle-income people over time, Brim-Edwards said at today’s meeting.
“If you’re living in a high-income ZIP code or making well over the threshold amounts, indexing may seem like just something that really doesn’t matter,” Brim-Edwards said. “But for many young families and seniors on fixed incomes, the lack of indexing may result in a tax increase in years to come.”
Multnomah County’s tax burden has been a hot topic for two years because there is evidence that high earners are leaving to avoid taxes. Adding up all the state, county and city taxes, Portland has the highest corporate tax rate in the country, 20.92%, according to a new report from the Tax Foundation called “Portland’s Weirdly High Taxes.” It has the second-highest rate on wages, at 14.78%.
Tim Clairmont, founder of Clear Financial Partners in Lake Oswego, testified that he has had a slew of clients leave the Portland area because of high taxes.
“I’ve seen clients vacating in a mass exodus for last few years due to this increased tax situation,” Clairmont said. “I feel like we need to take action. if your intention was to tax everyone, there wouldn’t be a threshold in the first place. The lack of indexing ultimately is going to create a tax on more and more and more people, as their incomes continue to inflate upwards.”
As usual, debate about the indexing amendment became heated, with Brim-Edwards and Vega Pederson at one point arguing over the proper use of Robert’s Rules of Order.
On more substantive matters, Vega Pederson asked if Brim-Edwards had spoken to county economists and other staff about whether indexing would imperil the plan to have universal preschool by 2030.
“My concern is that we haven’t done the work of really looking at what the potential impact of this would be,” Vega Pederson said. Indexing the Metro homeless tax is also being considered in a “piecemeal way,” Vega Pederson said, making it “difficult for me and the other county chairs to get eye sense of what the overall impacts are going to be on the programs that we’re delivering to the public in trying to address our homelessness crisis. I don’t want us to be in the same situation with Preschool for All.”
Brim-Edwards said she had discussed the matter with county staff, and that the matter seemed straightforward to her because so many other taxes are indexed.
“I didn’t think this was a material change because it’s just standard,” Brim-Edwards said. “It’s adding a fairness element so that people, especially in times of higher inflation, don’t get pushed into a higher bracket, even though they haven’t had increased purchasing power.”
Vega Pederson and Commissioner Lori Stegmann were unconvinced by Brim-Edwards’ arguments. Both called for more study by a technical advisory group that will convene in November. The vote on the indexing amendment was 2-2, with just Brim-Edwards and Commissioner Sharon Meieran voting in favor, which meant that it failed.
Commissioner Jesse Beason, the interim board member who took over from Commissioner Susheela Jayapal when she ran fo Congress, would have been the swing vote but was absent from today’s meeting. Last week, he said he was reducing his commitment to the county to 10 hours a week because county work took him away from family matters and from his job as chief executive of the Northwest Health Foundation.
“I have decided that at this current pace I cannot be a good son, a good CEO, a good partner and a good commissioner through November,” Beason said in a statement last week. “I have decided to step back my hours in public service (and my pay) and focus on my primary responsibility as commissioner: preparing for and attending county board meetings.”