An Income Tax on Wealthy Households Could Go to Portland Voters in Weeks. The Business Lobby Just Lost its Appetite.

Over the years, Portland-area voters have approved all kinds of taxes. But this May, voters will be offered a new proposition: Tax the rich to house the poor.

On the May 19 ballot, voters in three Portland-area counties could be asked whether households making $250,000 a year should pay more of their income in taxes to fund homeless services.

An income tax on the rich sounds like an obvious winner in progressive Portland.

As advocates have quickly crafted a ballot measure for May, they've zeroed in on the high-income tax as the most popular method to raise hundreds of millions.

But here's what's more surprising: The idea wouldn't be headed to voters without the aid of the city's business lobby.

The Portland Business Alliance, the city's chamber of commerce, has been working for two years as part of a coalition seeking taxpayer funding to help the homeless. Over the past two months, the PBA played a key role in pressuring the regional government Metro into referring a homeless services measure to the May ballot. It did so knowing the most popular tax to fund that measure was an income tax on the rich.

But last weekend, the PBA recoiled from its own creation. It opposed the central part of the measure—sending a letter to Metro voicing its opposition to the income tax.

On Feb. 16, the board sent a letter to Metro asking for a different funding mechanism: a payroll tax on most of the region's employees, not just the very wealthy.

"Asking only one small and highly mobile group of individuals to pay for this does not present the societywide policy solution that this initiative seeks to advance," wrote PBA president and CEO Andrew Hoan and PBA board chair Vanessa Sturgeon, a real estate developer.

Now the city's business community faces a dilemma: It has told Portland its top priority is helping the homeless. But Portland-area voters seem to prefer taxing the rich over other methods to raise the money.

In a town where Democrats outnumber Republicans by more than 4 to 1, the PBA is what has traditionally counted as the conservative interest group with sway at City Hall and beyond. But in recent years, the group has sought to create a kinder, gentler image and restore political relevance to the organization.

Perhaps nowhere has that new approach been more in evidence than in the PBA's work to push Metro to present voters with a measure to fund homeless services.

The group also supports the concept for a $300 million transportation measure—which brings the total price tag of the measures it endorses to a startlingly high $550 million. "It certainly should make members of our region check their perceptions of this organization," says Hoan, "and understand [that] fundamentally businesses' natural inclination is to be at the table solving the problems that we face."

But last week, the PBA board, when asked formally to weigh in, also voted to oppose a tax on high-income households.

"The alliance board of directors has overwhelmingly adopted the position that a regional payroll tax is the best way to achieve a resilient funding mechanism to combat chronic homelessness in our region," wrote Hoan and Sturgeon. By Feb. 17, a PBA representative testified against an Oregon House bill that would give Metro legal authority to levy a 2 percent income tax on the highest-earning households.

Why the sudden revulsion? After all, the PBA had known since at least October that a wealth tax was the likely preference of its allies: housing advocates and community groups.

Three sources tell WW that a handful of big companies led the opposition within the PBA to an income tax. Those companies include insurance firm the Standard and sportswear giant Nike. But Nike and the PBA both say that's not what happened.(Nike was not in attendance at the board meeting where PBA took a position.) Instead, the PBA says it conducted a blind poll of its members, and 90 percent of them favored a payroll tax.

The opposition has the potential to wreak havoc on the plan to tax the rich to house the poor. A measure that has active opposition is less likely to pass. And the PBA's letter suggests its members may provide that opposition.

The alliance is obviously an organization run by people who would be taxed by the measure, though the group has put its opposition in high-minded terms, saying a wealth tax isn't the best policy and that a payroll tax could also be progressive.

Others in the coalition backing the measure expressed alarm, in part because a payroll tax would hurt some businesses in a way an income tax wouldn't.

"We shouldn't push the burden of funding critical homeless services onto small business owners and workers who are already financially stretched," says Ashley Henry, executive director of Business for a Better Portland, which fashions itself as a more progressive business association. "If Oregon is to be a place where our community and our businesses thrive, regional support for homelessness services is essential, and we need to ensure that the ballot measure includes a funding mechanism that voters are going to approve on election day."

Polling shows voters like an income tax on the highest earners: According to polling shared at the last meeting of the HereTogether coalition, only 42 percent of area voters favored a payroll tax even if it carved out people making less than $50,000, while 62 percent favor a 2 percent tax on households that earn $250,000 or more annually.

The polling was paid for by business leaders who are members of the PBA and by backers of HereTogether. Both HereTogether and the alliance declined to release the poll's results. But the PBA suggests that as many as 60 percent of Portland-area voters support a payroll tax that exempts small businesses.

"We believe it would be a difficult campaign, but we believe it would be winnable," says Hoan. "We want HereTogether and this initiative to win. "

Metro was holding a work session as of press deadline and is still expected to refer the measure to the ballot Feb. 20, though details were still being hashed out in the days leading up to referral. Metro staff was recommending a measure that would raise $175 million a year by taxing any household income above $250,000. But advocates want the measure to raise $250 million a year.

All sides say the unexpectedly quick timeline for referral has given the PBA little time to negotiate with the coalition and come to an agreement with its own members.

Experts on progressive taxation say the income tax is understandably appealing to voters, even if business owners blanch.

"Of all the ways we can raise revenue, income taxes on people who are in the top 5 percent of household incomes is a good thing," says Daniel Hauser, a policy analyst with the Oregon Center for Public Policy, a left-leaning think tank. "It's the kind of tax that will do a much better job of focusing on those who have the most to help fund services for those with the least."