Governor Tina Kotek recently raised concerns regarding the impact of Multnomah County’s voter-approved Preschool for All tax on high-income earners, suggesting that it could drive wealthier residents out of the Portland area.
In a letter dated June 10, Kotek suggested that the county consider reducing the tax rate or pausing the tax altogether in order to prevent further exits of wealthy taxpayers from the area.
She cited figures that indicated a decrease of 1,722 taxpayers paying the tax in 2023 compared to 2021.
However, Kotek’s reference to outdated data was quickly challenged, as more current information indicated a growth of 5,429 tax filers contributing to the county’s tuition-free preschool program between 2021 and 2023.
County Chair Jessica Vega Pederson pointed out these updated statistics in her response to Kotek on June 18, which defended the efficacy of the Preschool for All program.
Elisabeth Shepard, a spokesperson for Kotek, confirmed the use of outdated figures and noted that the governor was reviewing Vega Pederson’s response.
Despite the outdated statistics, Kotek’s concerns regarding the departure of high-income earners may not be entirely unfounded.
County Economist Jeff Renfro stated in an interview with The Oregonian/OregonLive that there is a possibility that individuals with incomes exceeding $1 million per year are leaving the county.
The county’s data tracking the top 1,000 tax filers reveals that 310 of those who paid the preschool tax in 2021 did not contribute in 2023.
While Renfro speculated that this could be due to the volatility of high-end income or a lack of taxable income for those individuals, the county has provisionally concluded that most have likely left the area.
Conversely, Renfro noted that the loss of some taxpayers has been partially mitigated by the arrival of new high-income residents.
Around 160 new tax filers, who had not contributed to the preschool tax in 2021, appeared among the top 1,000 payers in 2023.
“Overall, the number of payers of the tax is increasing,” Renfro stated, adding that the broader financial landscape is complex.
The tax, which funds the preschool program, is set at 1.5% on any income exceeding $125,000 for individuals and $200,000 for couples.
Higher earners face an increased rate of 3% on any income over $250,000 for single filers and over $400,000 for joint filers.
In her correspondence, Kotek cited the county’s high tax rate of 13.9%, noting that it is the second-highest top income tax rate in the nation.
She also highlighted a decline in revenue from the preschool tax, pointing to a $55 million shortfall between 2021 and 2024.
In defense, Vega Pederson explained that this decline is attributed to the unusually high tax collections during the pandemic years of 2020 and 2021.
Additionally, a report from the Oregon Department of Revenue corroborated Vega Pederson’s position, noting that income sources tied to higher earners increased significantly during the pandemic.
The Portland Metro Chamber of Commerce supported Kotek’s proposal for the county to reassess the tax.
Chamber President Andrew Hoan expressed that while they back the early learning initiative, the tax structure could jeopardize the program’s funding.
Opponents of Kotek’s letter have expressed their dissatisfaction with her stance, gathering significant public support for the Preschool for All initiative.
According to the advocacy organization Friends of Preschool for All, over 19,560 individuals have sent letters supporting the preschool program to Kotek’s office and the legislature.
Supporters of the program have reacted strongly to Kotek’s remarks.
Olivia Katbi, co-chair of the Portland Democratic Socialists of America, criticized Kotek’s position, stating that it undermines the future of children in Oregon while catering to the wealthier demographic.
The Oregon Legislature has been set to discuss the implications of the Preschool for All tax in a Senate Finance Committee meeting.
However, the agenda indicates that the committee will only discuss the issue rather than enact any proposed changes immediately.
A recently posted amendment requested by the Senate Committee on Finance and Revenue could potentially terminate the county’s Preschool for All program.
The program, which voters approved in 2020, aims to create 11,000 tuition-free preschool seats by 2030 and has consistently overperformed in revenue collection.
In its initial three years, the program generated $213 million more in tax revenue than anticipated while underspending by $67 million, according to a county audit.
Despite challenges, the program has set the goal to provide 3,800 preschool slots by the upcoming fall semester.
The county has also encountered scrutiny regarding the preschool tax, with Commissioner Julia Brim-Edwards advocating for indexing income thresholds to inflation to better reflect current economic conditions.
Vega Pederson mentioned that the county board is working on revisions to the tax structure in the coming months.
Commissioner Meghan Moyer expressed her confusion over the governor’s position, arguing that assertions of widespread community backlash stem from a vocal minority with concerns about the tax.
She emphasized that while she acknowledges the need for balance to relieve the tax burden on middle-income families, the program is beneficial as it substantiates parents’ ability to work and decreases childcare costs.
Moyer cited her own financial investment of $1,650 per month for her child’s preschool as a personal experience that underscores the necessity of the program.
In conclusion, the ongoing discussions surrounding the Preschool for All tax continue to unfold amidst passionate responses from both supporters and critics.
image source from：oregonlive
