The Multnomah County Income Tax

The following is information about why the Multnomah County Income tax was created in the first place. It is taken from this Multnomah County webpage.

The Multnomah County personal income tax was created when voters approved Ballot Measure 26-48 in May 2003. It is a three-year measure that raises local funds to prevent further cuts to Multnomah CountyĆ­s public schools and programs that help the CountyĆ­s most vulnerable residents. It is intended to be a temporary, local answer to recent state budget cuts and a poor economy.

The tax is a 1.25 percent levy on the Oregon taxable income of Multnomah County residents reduced by an exemption amount ($5,000 for joint filers and $2,500 for single filers). Oregon taxable income includes most income, but Social Security benefits and federal and state retirement income will not be taxed.

The tax provides an estimated $128 million this year. The bulk of the money ($89-$91 million) will be divided equally, on a per-pupil basis to all county public school districts. The remainder will be spent on public safety and programs that serve the elderly, disabled and mentally ill.

Click here to find out where the tax revenue goes, at least according to officials in Multnomah County.

At this link you can find out even more about how the tax is administered and which employers are actually withholding the tax from wages.

While I don’t live in Multnomah County, my opinion of this tax is that it was very badly thought out. It was a rush job initiative that should never have been passed.

Administering the collection of tax was not thought out. There was no provision that employees had to withhold the taxes from paychecks.

The following are just some questions that came up when the tax was first put on the ballot.

  1. Should people who work in Multnomah County and live elsewhere be taxed or just residents who work in Multnomah County?
  2. How much will the actual cost of collecting and disbursing the tax be?
  3. If there is not mandatory withholding how much will actully be collected?
  4. Is the tax just a useless palliative that won’t really accomplish anything other than focusing attention away from the changes that are needed but will be put off?
  5. Jack Bogdanski, a tax law professor at Lewis and Clark College has writen about the tax. I’m going to put an excerpt from one of his posts at his blog below in blockquotes.

    The mail brought a historic document the other day — the first Multnomah County individual income tax form. It’s noteworthy in a number of respects.

    For a large segment of the population, which doesn’t follow taxes or the news very closely, this baby is going to cause lots of confusion. I’m glad I’m not the person answering the phone at the number listed on the form — it’s going to be a busy week.

    Here’s the skinny from my viewpoint:

    When the voters passed the 1.25 percent county income tax earlier this year, neither they nor the county commissioners required employers to withhold the tax from workers’ pay. Employers are allowed to do it voluntarily, but only if the employees ask and the employers want to. So far, I haven’t heard of a single employer or employee who’s doing it. And so the county’s residents are all going to have to figure out how much tax they owe, and then send the county a check for that amount, sometime between now and next April 15. (We’ll see how many comply! The feds and states learned a long time ago that you have to have mandatory withholding to make an income tax system work. Multnomah County obviously hasn’t gotten that far yet.)

    Anyhow, the form that the county just sent out is an “estimated tax” voucher that allows folks to pay the tax early, even though it isn’t due until next April 15. Unless someone is planning to pay early, the form can go in the round file. The “real” tax form will be out later.

    Why would you pay early? Sounds crazy, but for some folks it isn’t. If you itemize your deductions for federal and state income tax purposes, you may want to pay the county tax before Dec. 31, 2003, so that you can deduct it on your state and federal income tax returns for 2003. If you wait until next spring to pay the county tax, you won’t get to deduct it on your federal and state forms until you file your 2004 returns (in the spring of 2005). If you go that route, you lose the time value of the federal and state deductions for that whole year.

    Of course, if you don’t itemize your deductions on your federal and state tax returns, there’s no real advantage to paying early, so you can and should round-file the county form that just came in the mail.

    The main message that most people need to get is not the nuance of when to pay. More importantly, they need to figure out how much they’re going to have to pay, and budget accordingly. Perhaps the Bush tax cut will give them a larger federal refund than they expected, but Multnomah County will be taking a good chunk of that. And unless you file early for the federal refund, it won’t get here in time to help you pay the county.

    I realize that the money is needed for necessary projects, especially schools, but the tax was not and is not the way to get the much needed revenue.

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