High Taxes Are Hurting Portland Job Growth and Prodding Wealthy People to Leave, Report Says

High taxes are hurting job growth in Portland and chasing wealthy people out of town. Despite those aggressive levies, many government services are poor, in part because $1.26 billion in specialized taxes aimed at girding for climate change, getting kids into preschool, and helping the homeless have gone unspent.

Those are some of the conclusions of a long-awaited report from the tax advisory group of the Portland Central City Task Force, a panel convened by Gov. Tina Kotek in 2023 to rehabilitate Portland in the wake of the pandemic.

The 10-member group, chaired by local financial consultant Charles Wilhoite, presented its findings as “Nineteen Facts About Economic, Fiscal, and Service Conditions in Portland, Oregon.”

Specific items the study unearthed: Lawmakers and voters have enacted at least 20 major taxes on Portlanders since 2009. Local taxes on city businesses rose 82% from 2019 to 2023. People leaving Portland have higher incomes than new arrivals. About 40% of the transportation assets in Portland, such as roads, are in bad shape.

“The findings should not come as a surprise to those who closely follow local budget and fiscal matters,” the report says. “The city and county are emerging from a period that included a global pandemic, the largest federal stimulus program in U.S. history, and sizable, voter-approved expansions in taxes and services. These extraordinary circumstances have left these two local governments with an unusual mix of deficits in their general funds and significant ending balances in newly created programs.”

The news isn’t all bad. Corporate income taxes levied by Portland and Multhomah County have boosted receipts to $319 million in 2023 from $100 million in 2019. Unlike cash from specialized taxes, this influx can be spent on anything.

Also: Property tax revenue will shrink, but not collapse, as the value of downtown office buildings declines. That’s because the cluster of towers constitutes just 3.5% of the county’s tax rolls and 4.2% of the city’s. Also, taxes are based on assessed values, which have grown more slowly since the 1990s, when increases were capped. They are 40% below market values, which would have to fall much more to make a dent.

Two predictions from the group: Roads are likely to get worse because revenue from gas taxes, parking fees, and fines is going to drop from $160 million in 2019 to $140 million in 2030. And: Rising wages for police, firefighters and others will lead to budget deficits.

Things we pretty much knew: Metro’s supportive housing services tax and Multnomah County’s Preschool for All tax, both levied on high earners, lifted Portland into second place behind New York in terms of the top marginal tax rate. Portland’s is 13.9%, compared with 14.8% for New York. And: Portland’s homelessness rate is four times the U.S. average.

Authors of the report hammer away at the specialized taxes for homelessness, climate and preschool, saying they take money from more flexible general funds and squirrel it away for special purposes, where it goes unspent.

“Portland area taxes have grown several times faster than inflation over the past six years, but all this growth has occurred outside of the general fund,” the report says. “During this period, the city, county and region implemented new, layered taxes dedicated to specialized uses, while the primary discretionary revenue source for the city and county to pay for core public services and management functions has barely kept pace with growth in costs.”

Specifically, specialized taxes grew 77% between the 2018 and 2023 fiscal years, the report says, three times the 24% increase in general fund taxes. They outstripped inflation by almost the same amount.

The report asserts that the preschool tax and homeless services levies chased away some high earners, hurting the tax base.

“Coincident with the implementation of those income taxes, the average incomes of households leaving Multnomah County rose sharply and, in 2022, narrowly exceeded the average incomes of those staying in the county,” the report says.