In a week of strong comments, Charley’s stood out for its even tone and thoughtful analysis. Writing in response to last week’s post about the political tightrope the Portland Clean Energy Fund (PCEF) walks because of unexpected revenue windfalls, Charley broadened his critique beyond PCEF to include a certain type of ballot measure.
This comment is so polished, it’s almost as if Charley was angling for Comment of the Week. And you know something? that’s OK. Put some effort into it, write a short op-ed, that’s what we’re here for.
Here’s what Charley wrote:
PCEF is one example of a taxing and funding policy that has been used to fund popular ideas, but has some real flaws. In short, it would be nice if we could actually direct our local governments’ funding priorities, rather than create these easily mismanaged, bespoke funding mechanisms!
Other examples are the Multnomah County Homeless Services Tax and Portland Arts Tax.
Characteristics:
- a voter approved ballot measure,
- with a bespoke tax,
- which was marketed to voters as a way to fund a popular priority (such as addressing climate change),
- and which ends up being used to patch holes in the budget which are caused by the government’s other spending priorities.
It works like this: voters feel that their local governments aren’t adequately addressing some issue (arts funding, climate resilience), and advocates get a ballot measure passed by arguing that the ballot measure will force the City to address the priority.
As I see it, these measures are voters’ attempt to direct a local government’s budget prioritization, because the elected leaders don’t seem willing or able to change the prioritization themselves. Voters could theoretically vote for individual candidates that agree with their preferred policies, but the issues at stake in elections haven’t been specific enough to resolve this mismatch
Practically, all of our local candidates are “for” affordable housing, the arts, and climate resilience. Especially in City Council elections, it hasn’t mattered what a candidate runs on, because the Mayor could put them in charge of completely unrelated bureaus!
Some flaws:
Since these taxes haven’t changed the real priorities of these governments…
- The taxes add to the existing tax burden, rather than re-direct funding. We all just pay more taxes, rather than, for example, diverting funding from auto-oriented road projects to bike-oriented projects.
- The funds are subject to diversion. For example, while the Arts Tax was marketed to local arts organizations as a way to get steady funding, they’ve seen little steady money from the tax, even though the local arts community lobbied the public in support of the measure, and the public understood the tax to be of great benefit to these organizations.
- Sometimes, governments just literally don’t spend the money (Multnomah County Homeless Services Tax).
- There’s little democratic accountability. One can’t just vote the Arts Tax out of office.
I seriously think people are fed up that local governments don’t address climate change, fund the arts, or make more housing and would be happy if they perceived that City had made these kinds of things priorities in the budget; they may not be thinking about the total amount of taxation, or the fact that the money will end up going other places!
Thank you Charley. One characteristic of a good comment is that its sparks other good comments. Take a peek at the responses, they are worth reading too.
Thanks for reading.
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Thanks for helping me correct an error in the earliest version of this comment! As it turns out, my correction wasn’t quite right, either.
Rather than the “Multnomah County Homeless Services Tax,” it’s a Metro area tax, collected by the City of Portland, but the funds appear to be distributed by each County in the Metro area. Each of those counties has unspent funds, but Multnomah’s unspent funds have gotten in the news more, which is why I associated the tax with the county.
Apparently this is an ongoing concern:
https://www.wweek.com/news/2024/02/28/new-figures-show-multnomah-county-still-isnt-using-the-homeless-services-tax-money-metro-covets/
Which reinforces my misgivings with these taxes: opacity in their design and implementation reduces the force of any democratic lever one might pull!
There have been big issues with how the county has handled the funds, but I think the issue is poor leadership and administration at the county rather than the funds themselves yes? And if the money was being used to plug and play elsewhere, surely that would have been done by the county already.
Thanks for the correction, Charley. There seems to be some confusion between Metro’s Supportive Housing Services tax and Multnomah County’s Preschool for All tax, which went into effect at the same time.
Also, it’s not true that “we all” are paying these taxes. The Supportive Housing Services tax only applies to income earned above $125,000 (for individuals) and businesses with gross receipts over $5 million. And a bunch of those people didn’t even pay it.
All of these bespoke funding structures are at least in part a result of our totally broken and horrible property tax system. For the unaware, Measure 5 and 50 (two separate ballot measures in the 1990s) created a system which hamstrings local governments most important source of funding (property taxes), is horizontally inequitable (people with property of equal value today pay different amounts of tax), and is extremely confusing. The most relevant part pertains to the Measure 50 3% cap on assessed value growth year over year though. Inflation since 1996 has been 3.2%, and while a 0.2% difference doesn’t sound like much the net effect is large over a 30 year period (~30% increase). All of that on top of a 5% cut in assessed value on all property at the time of the ballot measures!
Every local government that relies heavily on property taxes (city and county) faces a built in structural deficit. In an environment like this, it shouldn’t be a surprise that bespoke funding is the norm!
And for what it’s worth, Oregon is ranked 31/50 in overall tax burden (as in 31st lowest) at a bit over 10% – similar to Washington, Ohio, New Mexico, and Arkansas. And before you say “well it’s higher in Portland, with Preschool For All and Supportive Housing Taxes” consider that most of inner Portland has disproportionately low property taxes (especially in areas that have seen large gains in value since 1996) relative to both the state and the region. In some cases, assessed values are less than 1/4 of market value – which is something like an $12k discount on $1M of property! You’d have to make something like $600k/year as a household for that to even be paying more on the combined pre school for all/supportive housing taxes.
Plus, PCEF is sort of different from these other taxes (as a sales tax). While sales taxes are traditionally passed through to consumers, given that PCEF only applies to large retailers and in a specific geographical area I think it’s probably less clear as to who actually pays. Large retailers can’t just uniformly raise prices by passing the tax through without potentially risking loss of customers.
Measure 5 was certainly a very destructive force for our State. But where is the initiative petition to reverse it? Or to add a sales tax, maybe in exchange for unwinding other taxes? (Yes, a sales tax is regressive, but in the Metro area taxes are really uncontrolled, e.g. revenue that far exceeds estimates, and then the funds go unspent.)
Do you think people would vote to double, triple, or even (based on blumdrew’s figures) quadruple their property tax? Even the most tax-happy progressive is going to balk at that.
That’s why we’re seeing tax measures that only “other people” pay. Taxing other people is much more popular than taxing ourselves. If the money’s wasted, well, at least it wasn’t mine.
PS I predict we’ll see the heat death of the universe before Oregonians impose a sales tax on themselves.
Property tax reform can and should be done in a revenue neutral way (initially). This would mean a tax cut for some (mostly people who own property with assessed and market values that are close together – i.e. places that had relatively higher value in the late 1990s), while a tax raise for others to get rid of the existing horizontal inequities. Though it is possible that some property owners with exceptionally low tax bills now (relatively to their value) may see a double in their bill, I don’t think that would be the norm
What do you think it would take to build a successful political campaign around the issue, one that would get the 60% of votes needed to amend the state constitution?
Is anyone motivated enough by the issue to make it happen?
I have no idea. I think it would require a lot of organizing around, and a ton of mass education on what the ramifications of our current system are. Some of it came up around school funding in the latest strike, but that’s even more complex since the state sets per head funding and then gives subsidies to make up the difference from local property taxes. Which is good in some ways, since it makes school funding more equitable but it also means that things like COL raises come out of a fixed bucket.
There’s occasional news coverage of it, but it just doesn’t seem to be urgent. Maybe if the county started adding “this is how much more you pay in property taxes versus an equally valued property” to everyone who pays relatively more would do something
It’s a statewide issue, so this would have to be a concerted effort across many counties. I have no clue how it would impact people elsewhere.
Since this would open the door for future potentially large property tax increases for everyone (including those whose rates might initially fall), people would need a pretty good reason to support repeal… especially given how clear it is that our tax money is not being well managed as it is.
The issues that are present in property taxes in Portland are present everywhere in the state. Places are functionally taxed based on their value in 1996, rather than their current value.
And yes, it does potentially introduce property tax increases in the future. But that’s ultimately a good thing – it means local governments have revenue streams which more closely match their realistic expenses and the whole (original) issue of spinning up bespoke funding could be reduced. As issues arise with folks being unable to pay their property tax bills, common sense measures for homeowners in their primary residences could be implemented.
I don’t necessarily disagree (though I’d be more confident if I saw our tax money being well spent). I’m not making a case for or against, but rather exploring Jon Radmacher’s question about why no one is attempting to repeal Measure 5, which was the popular response to tax increases in the past.
My response would be that, statewide, people aren’t feeling the confidence in local/county government to give them the freedom to raise their property taxes without limit, and no one is even trying to make the case that they should have this power restored.
It is simple, you make a sale a triggering event for reassessment, then you grab the people who can afford the higher taxes and don’t negatively impact the people who have been operating under the current system for years. Otherwise, you’re happily taxing unrealized gains which is something that should always be unpopular.
It may be “simple”, but convincing 60% of the state to open the doors to higher property taxes (even if it’s on their next house) would be a challenge that no one seems interested in taking on, unless we get a big out-of-state ideologically motivated think-tank to push it, a la Measure 110.
Also, there could be unintended consequences to your proposal: if moving meant a substantial increase in my property taxes, that would discourage me from moving, gumming up the market much as higher interest rates have.
Sorry, this was somewhat sarcastic. You end up with lots of unintended consequences, chief among them, many transactions that would have happened don’t, which only pushes prices higher.
While sales triggering reassessment would most likely help things, it introduces other issues – which can be noted by looking at how Prop 13 has gone in California. Taxing unrealized gains is how almost every other state does property tax assessment. It might not be popular, but if you are looking for your taxes to be popular you’ll spend your whole life looking.
People who own rapidly appreciating assets benefit from owning them, and should be taxed as such. Rather than giving a blanket exemption to everyone, having targeted programs for folks in their primary residences and who are being unduly burdened by property taxes should be used.
Some of those revenue issues are just related to forecasts – and forecasts around 2020 were horribly inaccurate across the board. Those are issues that are inclusive of all types of taxes.
I’d gladly sign on to literally any property tax reform ballot measure, it’s just not something people tend to be passionate about (unless they’ve recently learned about how stupid our system is)
Please keep in mind that just about every public infrastructure investment made assumes growth in people and future revenue from that growth. The numbers from the climate scientist are not the only ones being ignored. So are the numbers from the statisticians monitoring world population growth. If the Vegas Odds Makers are right (they are seldom wrong) and Trump is elected, the only source of people that is currently fueling America’s population growth – illegal immigrants – will go away soon, and we will start flat lining with the end result being such public infrastructure investments as the stupid Rose Quarter and even stupider Columbia River Mega Bridge Crossing will leave the tax payers hung out to dry. The homeless (or is it unhoused?) will have a lot of company in that shoes and bikes may be their only affordable transportation option.
I hope Portland planners are taking into account the recent leveling off/fall in our population. That might not last… but it might.
They are, or they are if they are following projections coming from the Population Research Center at PSU – which does statewide projections and whose most recent projections definitely account for that!
Not really related to economic forecasting around 2020. The issue there was primarily that economists were too timid in projections around a post-Covid economic recovery. Maybe understandably, but that’s at the root of why all the taxes in the region have way more money than expected. And it’s not like you can just wave your hand to hire more people to spend it – only so much has been budgeted for and hired for and public institutions tend to be slow to respond to that sort of thing on purpose.
I’d be in favor of shifting to a land value tax! I think that could help.
How about a 2% sales tax on grocery food to fund highways? That’s what North Carolina has.
A rent payment tax for tenants (e.g. 10% of monthly rent) would be an even better way to avoid unfair taxation of the large corporations (and their investors) who are the true source of American prosperity.
How about a squatter tax on homeless camps in the public right-of-way, have PBOT charge $1/square foot per month and use the proceeds for homeless camp clearings – anything left over can be used to promote sidewalk cafes, open streets events, Sunday Parkways, and street-seats use by local businesses, to reduce homelessness?
You know, that’s a good idea. If the argument is that “storing one’s private property (car) in the public space” should have a cost, so should urban camping.
Camping meters downtown?
What do you call it when the reply to a satirical comment is a policy proposal?
We have “urban camping” because it’s free and not because it’s desirable.
If we’re going to have laws, they should be enforceable. Taxes should be easy to pay and hard to avoid. Making laws that have no chance of real effect pretty much hollows out the whole notion of a law.
‘It shall be a law that people with a handle of five words or more put a quarter in the jar on Jonathan’s porch for every comment to pay for the extra bandwidth’
That’s really funny.
I’ve got an idea!!! Forget Jonathan, let’s set up a toll for comments, paid directly to me. Twenty-five cents to initiate a comment and a penny a letter thereafter. I mean, a girl has to buy new reading glasses every once in a while.
I think those quarters should be distributed to readers whose handles are 5 letters or less. Bandwidth climbs with the 4th power of handle length, and we should stop subsidizing people who use this forum for free storage of their personal bytes. Or something.
You should run for office on this idea and see if you get more than a four figure vote total.
I am running for office and I’m glad that you like my modest proposal!
Or a salt tax?
I would have suggested other satirical taxes such as a highly regressive poll tax, but Portland already has one, an “Arts Tax” to support classical music and other rich-person’s pursuits; or a low 1% flat tax on property, but Oregon did that in 1992; or even legalize hard drugs, but in fact Oregon seems to do everything dysfunctionally possible to dig itself into an early grave already.
Middle-of-the-Road’s idea of pay stations or parking meters for homeless camp sites sounds very Oregon, I can see that passing in an Oregon or city referendum.
NC is one of several states that simply doesn’t allow for referendums of any sort, not even in cities and counties, so I kinda miss Oregon’s wacky referendum culture.
I pay my Arts Tax with salt.
Portland Symphony tickets are only $5 if you have a SNAP card, which I agree, makes attending pretty much a rich person’s pursuit, especially compared to plebian artists like Taylor Swift (whose low-end tickets sell for over $1000, no SNAP discount available).
It is also true that the non-rich don’t have time to attend evening performances because they’re all single moms working 3 jobs.
My issue isn’t so much on what the arts tax pays for or who chiefly benefits, though that is obviously a concern, but how it is implemented and who is being taxed. The minimum threshold should be the standard deduction on the Federal 1040 – $13,000 – rather than $1,000 which even taxes even the very poorest residents, and there should be a higher rate for rich earners rather than a flat tax. It’s about as unfair a tax as possible, I’m amazed the US Supreme Court even allowed it.
Definitely agree, land value taxes are the best way to tax property
How? If I buy a home and subsequent to my purchase, the city changes the zoning, which ends up allowing for denser housing to be built, yet I have changed nothing at all on my property, how is it remotely reasonable to tax me on the unrealized gains in land value? And should land values go down because my neighborhood is now overbuilt with multi-unit housing, do I get a rebate from the county?
For the same reason that it’s fair and reasonable to tax anyone on unrealized gains in property. You are benefiting from increased land values (or the sort of abstract version of “you” is). When the value of property you own increases, you receive some direct benefits (say if you ever tried to take a loan out with your property as collateral).
If you can find me a real-world example of per unit land values going down because of a neighborhood being “overbuilt” with multi-unit housing, I’ll eat my shorts. Higher levels of density tend to increase the value of land. But if the value of the land you owned decreased, you would pay less on your next tax bill. That’s how property taxes work now. Incidentally, around the time of the recession because of the large gap between the assessed value and market value of homes in Portland when market values were falling, property taxes kept increasing. Not exactly what a good tax structure does!
But finally, the real power of taxing land ultimately comes from reducing how much land speculation can be reasonably done. If you own a vacant lot in a normal property tax regime, you get a tax discount relative to your neighbors who have developed their lots. This perverse incentive increases the likelihood of land speculation – something which does not benefit anyone in society.
Density may increase the value of adjacent land, but often because it becomes more attractive for redevelopment.
Simultaneously, it can become less attractive for those living there (and hence less valuable for its current use). Assessing people more tax is an additional bonus.
So its change in value is a matter of perspective. If your goal is relentless redevelopment, land value taxes are a good thing. If your goal is stable and mature communities, they’re probably not.
I hope you’re well on your way to being a homeowner, that experience will shift your perspective on many of these things and likely derail some aspects of the Elizabeth Warren approach to taxation, “somebody has something I don’t, so I should get taxes from them”.
You may find that once you have real estate, being told by someone else your use of it isn’t the highest and best, so you must pay tax on the land like it is the highest and best use slightly less palatable.
Do you think the land value for parcels slated for condominium or multifamily development have gone up in the last couple years or down? It would appear that due to construction costs, both hard and soft, interest rates, cap rates, HOA dues, etc. that the land for these assets has to have gone down in value because it is about the only aspect that can be adjusted to get something to pencil.
In the land tax regime you describe, the government gets to decide what the highest and best use of the land is, that seems like power they shouldn’t be granted. Further, and this is likely a philosophical position, how does someone speculating on a land purchase harm society? If I buy something outside the urban growth boundary, and then the UGB moves to include my property, the value then goes up, the county is not party to the risk I took.
If we are similar to Washington in our “overall tax” burden (a strange metric given the wide variation in incomes and taxation rates in American society), then howcome I’d save about $4,000 if I moved to Vancouver?
Why are so many people moving there for taxation reasons if they are taxed the same? I find your argument funny because it appears to maintain that these people are just not that smart. People know how much tax they pay–we are required to sign forms that we send to the government with the amounts listed on them.
Having just tallied food and drink costs for my taxes, I can tell you that housing and food were by by far my biggest expenses, neither of which are taxed by Washington State but ALL of my income is taxed in Oregon.
And our supposed progressive taxation rate’s highest bracket kicks in at the very wealthy income of $20,000 per year.
Plus one can control (consume less) and game (buy stuff in Oregon) sales tax payments. Not the income tax.
My guess is that you have relatively high income, and so would benefit from the move based mostly on income taxes. Clark County has (generally) higher property taxes than Portland (though this can vary depending on what part of Portland you live in due to Measure 5/50 shenanigans). I’d also assume that the tax burden is relatively higher in Seattle than it is in Vancouver, so it could still be like a 9% in Clark County vs. 11% in Multnomah County. Of course there’s variation between different people based on the specifics of their lives, but I can’t type out a comment based on “donel courtney”s life. How else would you propose to compare tax rates between different places? Picking and choosing whatever makes the place you’ve already decided is bad look bad?
Do you have any evidence to cite for this other than vibes? My general understanding is that is has far more to do with housing costs than tax burden. If you can save $10,000/year on housing, the relative difference in tax burden sort of doesn’t matter. Housing and jobs play a far larger role in where people live than taxes. Maybe if you are at a point in life where you’re considering buying a house and moving anyways then you would do a bit of math on tax burden, but do you expect me to believe that people pick up their lives to move to Clark County to save $300/month on taxes and not to save $800/month on housing?
??? there are property taxes in Washington. They are (generally) higher than they are in Oregon. And you can game the sales tax by crossing the state line, but consumption is pretty inelastic (part of why sales taxes are attractive to government).
Yes, the income tax brackets should be adjusted in Oregon. But it’s still more progressive than a 10% broad based sales tax like Washington has.
I get the sense that perhaps you are a younger person and indeed when I was that age my perspective was different. But the specifics of your replies don’t really add up either.
Is an income that is the median income in Portland metric “high”? it seems by definition not high, that amount will cost you over 4,000 in Oregon income tax.
I’m surprised you do not know this.
Causation is typically multi-factorial. Yes I do know of specific people that have moved to Clark county primarily because of the income tax. They are higher income, yes.
And man, just look at the population decline in Multnomah county–people need to think hard about the reasons for this and think outside their box.
I mispoke, I meant Washington does not tax housing with the sales tax. Both states have property tax so that is irrelevant to my discussion.
I just checked property tax on a Vancouver house in the 400,000 range, same as mine, It has the same property tax.
Forgive me if I also think you are functioning alot on “vibes”.
Okay, are you saying that you will save $4,000 by moving to Clark County by virtue of not paying income tax? It’s just more complex than this (especially if you still work in Oregon). Other taxes are higher in Washington (sales, property) so you will not end up just saving $4k in taxes. You’ll pay a large portion of it by other means. But considering that so much revenue collection in Washington is from the sales tax, it’s much more difficult to say how much you’ll actually pay. Washington collected $13B in sales taxes in 2021 – about $2,000/person. There’s obviously a lot of variation by person and likely between regions, but I couldn’t find Clark County specific data (Washington data here). So a net savings of about $2000 could be significant – but that could easily be outweighed by increased transportation costs, or increased property taxes.
I can tell you that any tax savings I would get by moving to Clark County would almost certainly be offset by a combination of paying sales tax and increased transportation costs (since I would have to drive more). But I live fairly far below the median income in Multnomah County, and am in a part of town where property taxes are artificially low, and I rent. If you’re a renter in the region right now, you’re almost guaranteed to find a place in a better location for a better price in Portland than you are anywhere else.
This is quite interesting, but is not true for everyone. Washington has a much more straightforward property tax system. This $400k house pays ~$3,500 in property taxes in Clark County. Here is a $500k house (by Real Market Value) in NE Portland that pays only $1,700 in property taxes (since the assessed value is so low), while this $450k house (again by RMV) in. SW Portland pays over $5,000. This amount of local variation for similarly valued property is the horizontal inequity of the Oregon property tax system at its worst. If you live in N/NE Portland, it’s likely that any savings you may get from the difference in sales/income tax rates between Multnomah County and Clark County would be outweighed by the difference in property taxes. If you live in SW Portland, you might save money on property taxes by moving across the river. But it’s all on a block by block basis, largely related to what a home was assessed at in 1996. If you want to talk about specifics of tax savings someone may get in Clark County vs. Multnomah County you can’t just ignore the huge local variation in property taxes within Multnomah County! Here is a piece from the Oregonian on what the dynamics look like (in terms of effective rate – that is total tax / market value of property)
Again, there are probably more compelling reasons (housing, safety and perception thereof) for people to leave Multnomah County rather than tax burden. Here is a paper about tax flight if you are looking for something more than “vibes” to base this on.
People who often suggest that taxing the “other people” or Portland is just fine, don’t often pay much in taxes themselves.
The concept that so much of our taxes goes to government to pay for questionable and non-performing programs is ok with them since they have so little skin in the game.
Hey, if I could get away with not paying taxes by living in someone’s basement I just might! /s
But then again, I’ve worked hard and long to get where I am today and don’t have a desire to be a non-productive member of society.
Congratulations on being one of the rare individuals who managed to succeed through hard work alone. Most wealthy and even moderately well-off people got where they are mainly through luck and should definitely be taxed more.
Why not have your cake and eat it too? Claim residency in North Dakota, which has one of the most liberal residency laws in the country and extremely low taxes, but live day-to-day in Oregon where there’s no sales tax?
This is exactly the kind of information that will make Portland Great Again. Thank you Charlie and thank you BP. Margaret Mead said “Never doubt that a small group of thoughtful committed individuals can change the world. In fact, it’s the only thing that ever has.” We need more “Charlie’s” to help make us more thoughtful.