Portland Business Tax Unfair

Steve BucksteinQuickPoint!

Last year, Inc. magazine rated Portland the nation’s eighth worst metro area in which to do business. It also said that Portland has lost its sizzle as one of the “cities of the future.”

One of the biggest impediments to doing business in Portland is the Business Income Tax, or BIT for short. Other Oregon cities levy relatively low, flat business license fees, but Portland and Multnomah County together charge businesses 3.65 percent of their net income earned inside the city and county.

There is an owner’s compensation deduction of $57,500 per owner, partner, or controlling stockholder, on the rationale that any income above $57,500 is actually a profit, not compensation for work done in the business.

Of course, the very city and county commissioners who set this $57,500 level earn much more than that themselves. City commissioners, for example, earn over $88,000 a year. Why their labor is worth $88,000 but a business owners labor is only worth $57,500 is hard to justify.

Portland city commissioner Sam Adams recently introduced an ordinance that would have increased the BIT owner’s compensation deduction from $57,500 up to $125,000. Other commissioners quickly killed that idea.

So, we’re left with a situation where business owner’s earning $88,000 must pay over $1,100 more in taxes than city commissioners earning the same amount.

No wonder we see a steady stream of businesses relocating to other counties or moving across the river to Vancouver. Stopping unfair taxation is the first step toward turning this situation around.

Steve Buckstein is senior policy analyst at Cascade Policy Institute, a Portland, Oregon based think tank.

© 2006, Cascade Policy Institute. All rights reserved. Permission to reprint in whole or in part is hereby granted, provided the author and Cascade Policy Institute are cited. Contact Cascade at (503) 242-0900 to arrange print or broadcast interviews on this topic. For more topics visit the QuickPoint! archive.

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