Portland, Oregon area voters approved two ballot measures imposing a new business profits tax and two high earner taxes in 2020. The new taxes took effect January 1, 2021.
The ballot measures were voted on in May and November. The May ballot measure applies to the Metro Area (Washington, Clackamas, and Multnomah Counties) and imposes a personal and business income tax. The November ballot measure applies only to Multnomah County and imposes a high earner tax.
May Ballot Measure
Metro Area voters approved the personal and business income tax to fund supportive housing services. The taxes are:
- a marginal income tax of 1% on households with taxable income over $200,000 (or taxable income over $125,000 for individual tax filers); and
- a business profits tax of 1%.
The Metro Council has been working on implementation plans since the ballot measure was approved in May. According to preliminary meeting minutes from a December council meeting, the Council voted to approve implementing ordinances.
The taxes take effect in 2021 and stay in effect through 2030 unless reauthorized by voters.
The administration ordinance requires all tax returns be filed with payment by the 15th day of the 4th month following the end of the tax year.
Every taxpayer with $1,000 of liability or more must estimate and pay the liability by:
- making quarterly payments; or
- employer supplied withholding from taxpayer’s wages.
The first payment date for quarterly estimated payments is April 15th.
Beginning in 2021, withholding is voluntary, but employers must offer employees withholding from wages as soon as possible. In 2022, withholding will be mandatory for all employees that work in the Metro District and earn $200,000 or more.
Personal Income Tax
The personal income tax will be assessed on residents of the Metro district and non-residents who have income earned in the Metro district. Only income above $200,000 ($125,000 individuals) will be taxed.
Business Income Tax
The business income tax has an exemption for small businesses with gross receipts under $5 million. Sole proprietorships and disregarded entities are not subject to the tax but are subject to the personal income tax.
November Ballot Measure
In November, Multnomah County voters approved an income tax on high earners to set up a tuition-free preschool program.
The tax will be on residents and on taxable income derived from sources in Multnomah County at the rate of:
- 1.5% on taxable income over $125,000 (single) and $200,000 (joint); and
- an added 1.5% (3% total) on taxable income over $250,000 (single) and $400,000 (joint).
The rates will increase by 0.8% in 2026.
Households with taxable income below $200,000 (single filer below $125,000) will not pay the tax.
Tax for the year is due April 15th the following year.
Paying the Tax
Multnomah County has released a set of questions and answers regarding administration of the tax.
Employers will opt employees into withholding if they make over $200,000. Multnomah County employers must offer withholding in 2021, once their systems are updated to handle withholding. In 2022, withholding becomes mandatory.
The City of Portland will be accepting the remitted taxes. The planned launch is April 2021. The tax for 2021 is owed by April 15, 2022.
By Andrew Soubel, J.D.