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BY ALAN PITTMAN
Local School Funding
Council puts measure to vote, but hits poor with tax
T
he Eugene City Council voted 7-1 Feb. 14 to refer
to the May ballot a local income tax to save schools
from brutal budget cuts. But the council may have
made voter passage of the $17 million measure for kids
much more diffi cult by subjecting people living in poverty
to the tax.
The council voted for the measure after 4J and Bethel
school superintendents told them that waiting for a possible
November vote would likely delay revenue for a year and
force more budget cuts. An ECONorthwest economist also
told the council that the income tax measure for schools
would have “a net positive impact on the local economy,”
creating hundreds of jobs.
“It’s about our children, and it’s about our future,”
Councilor Alan Zelenka said, “and it’s good for our
economy and good for our jobs.”
Over the past three months, hundreds of parents,
teachers and other concerned citizens have urged the City
Council to help schools facing the threat of classrooms
crowded with up to 50 kids and facing school weeks
effectively cut to four days.
But as Eugene Weekly went to press, it was unclear
whether the City Council would change the measure to
address the poverty issue and make it easier to pass. Sources
said councilors may seek to vote to limit the impact on the
poor at a noon meeting Feb. 16.
At the Feb. 14 meeting, the council voted for the tax
option with the greatest impact on the poor. Two other fl at
tax options prepared by city staff and consultants protected
the poor by exempting joint income below $35,000 or
$50,000.
Another plan, “Option D,” also protected a large part of
the city’s lower middle class in addition to the poor, giving
a potential big boost to measure support. The measure
would have exempted taxes below $50,000 and included
a progressive, graduated income tax for higher incomes,
similar to the rising rates in federal taxes.
City staff also presented the council with the option of
simply setting a $17 million limit on the tax for the measure.
Then the council could take more time to carefully work
out the actual tax rates and income threshold by crafting an
implementing ordinance over the next three months before
the election.
But at the Feb. 14 meeting, West Eugene City Councilor
Chris Pryor appeared to make taxing the poor a condition
for his key swing vote for a May measure for schools.
“Everybody needs to have skin in the game,” Pryor
argued in favor of impacting the poor. “If we can arrive at
that tonight, I am willing to ask you that [ballot measure]
question in May.”
At Pryor’s prompting, councilors replaced a motion
exempting incomes under $35,000 with Pryor’s proposal
to tax the poor.
Pryor’s proposal includes graduated rates that are nearly
fl at. Everyone with joint incomes over $22,000 would pay
the same 0.9 percent tax rate. Incomes from $10,000 to
$22,000 would pay 0.69 percent. Joint incomes below
$10,000 would pay 0.49 percent.
The council’s tax measure would hit a family of four
trying to survive at the federal poverty line of $22,350 with
the top tax rate for a total tax of about $166, based on state
tax forms and standard deductions.
“I think that’s really unfair,” Councilor Betty Taylor
said of the council’s move to tax the poor.
Asked after the meeting why he supported taxing
people on welfare, Zelenka replied, “politics is the art of
the possible.”
Under the council’s tax plan, millionaires would
probably have a lower effective tax rate than families in
poverty because the wealthy are more likely to itemize
their deductions.
But taxing people so far below poverty is extremely
rare. The federal income tax effectively exempts 100
percent of families below $20,000 and 80 percent of
families below $40,000 in income, according to Tax Policy
Center calculations including rates, exemptions, credits
and deductions.
Even the most radically conservative proposed changes
to the federal income tax do not envision taxing people
in poverty. Republican billionaire Steve Forbes’ “fl at tax”
proposal exempted families under $46,000, for example.
The average effective state income tax threshold for
a family of four is $25,500, according to the Center on
Budget and Policy Priorities. Oregon effectively doesn’t
tax such families below $18,900 in income.
It’s unclear even if the city tax on very low incomes
would be possible. The council appears to want to base the
tax on a percentage of Oregon Taxable Income, a calculated
line on state tax returns. But Oregon doesn’t even require
families earning less than $10,700 to fi le a state tax return
and calculate their taxable income.
That could force the city to create a new tax collection
system outside the state system that would cost far more
to implement than it would actually collect. Only about 10
percent of local taxable income comes from returns with
less than $25,000 in income, according to state data.
Although taxing the poor doesn’t generate much
revenue for schools, it may cost the measure many votes
at the ballot. A fl at county income tax to fund the jail failed
2-1 in Eugene in 1999 amid criticism that it was unfair to
the poor. But that tax actually was much fairer to the poor
than the City Council’s proposal. The county tax exempted
joint incomes under $20,000 and included a $15,000
deduction for families.
Advocates of taxing the poor argue that it’s unfair to
have everyone vote on taxes that won’t affect everyone,
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and that it’s harder to pass taxes that don’t tax the poor
because the rich will spend heavily on campaigns to defeat
the measures.
But that’s not how democracy apparently works here
and in Oregon. State Measure 66 exempted joint incomes
under $250,000 and passed 3-1 in Eugene last year.
There’s also little logic that the rich will only support
a higher tax if it includes the very poor. The option to
exempt joint incomes under $35,000 would raise taxes on
the wealthy by only 0.01 percent over the rate that would
include those in poverty.
Although taxing the poor may offer little benefi t while
making the school income tax much harder to pass, that
may have been exactly the point.
Councilor Pryor had argued against the effort to fund
schools at a previous meeting as had Councilors Mike
Clark, George Poling and Pat Farr, although they all
claimed that they support education. Clark, Poling and Farr
voted for a failed motion to postpone consideration of the
measure until a possible November ballot, which school
supporters said could kill the campaign to fund the schools.
Clark and Poling argued that the measure to fund
schools would hurt the economy, but a report for the city
by ECONorthwest, a leading economic consulting fi rm,
countered that claim. ECONorthwest found that because
the tax revenue would be spent locally, the measure would
create hundreds of net jobs and millions of dollars in
increased wages.
The economists found that the tax wouldn’t likely
drive businesses and taxpayers to locate elsewhere since
other factors are more important. Instead, the tax would
attract and retain businesses and taxpayers with improved
schools. “The favorable impact on location and production
decisions provided by the enhanced services may more than
counterbalance the disincentive effects of the associated
taxes,” ECONorthwest reported.
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