Cutting taxes in Portland

The Portland City Council passed legislation last Thursday providing $3m in tax relief to Portland’s businesses. I was irritated to see The Oregonian‘s editorial last week applauding the move carried a photo of Mayor Potter, since the project to make business taxes fairer has been led by Sam Adams from start to finish. They have another editorial today giving the credit to Sam, without mentioning the Mayor at all. I wonder if someone said something…

Some of my notes from the hearing:

94% of Portland’s businesses have fewer than 50 employees.

In 2006, Forbes ranked Portland 20th in its list of 200 Best Places to do Business, and 8th in the cost of doing business.

Businesses are coming to Portland in greater numbers than those leaving. In 2004, 661 business accounts closed with the City of Portland – 1.9% of all accounts, with a loss of fee revenue of $368k. There was net growth of 2000 new businesses moving in.

Five-year job growth is down 1.8% in Portland.

Portland is one of the few large cities in the country with a AAA bond rating, showing financial analysts consider our financial stability management sound. In contrast, the state of Oregon’s bond rating is AA-minus, one of the worst in the country.

The problem the Council intended to fix on Thursday, is that small business owners pay more than large corporations, many of which pay the $100 minimum annual tax. And, the exemptions for threshold income from the business, and personal deduction for the owner’s salary, are not index-linked and have not been adjusted for inflation for decades.

The Council fixed only half the problem, in fact they half-fixed half the problem, in my opinion.

They increased the threshold and exemption levels, but by setting new numbers in the regulations. I would have preferred to see index-linked standards that would automatically adjust for annual inflation to set the “fair” numbers when businesses should start paying. Otherwise, in ten years we’ll be doing this over again.

And, the Council promised to come back in the fall, to fix the other part of the problem, that of big corporations paying too little. I’m not sure why they couldn’t do both concurrently, to avoid another $3m hit to the General Fund. It makes no sense to me to continue to give big corporations huge tax breaks, while at the same time Portland Parks is considering a sponsorship policy that sets the expectation Parks will be underfunded and need “donations” from corporations in return for special recognition posted in parks.

I’ll be watching. The next step should be for the City Council to reject the stated policy of underfunding Parks, with the expectation that later this year large corporations will be required to pay their fair share, rather than being invited to do so by offering special perks.