In the years since 2021, when Multnomah County began collecting its Preschool for All tax, much has been made about the effect the program may be having on county income demographics. County data from 2022 and 2023 showed a decrease in the number of high-income earners paying the tax, prompting some to fear the universal preschool initiative was driving wealthy Portlanders out of town.
Recently-released statistics, however, show the number of high-income households paying the tax increased by roughly 14 percent in 2024 compared to the year prior. While there’s still not enough data available to support sweeping conclusions about Preschool for All (PFA), the 2024 data suggests the number of high-income earners in Multnomah County bounced back after a dip in 2022 and 2023. That dip may have been caused in part by people filing their taxes late, or experiencing fluctuations in income.
The Preschool for All program was adopted by county voters in 2020 and went into effect in 2021. It’s funded with a marginal income tax on Multnomah County’s highest earners, starting with a 1.5 percent tax on earnings above $125,000 (single filers) or $200,000 (joint filers). The tax rate increases to 3 percent for earnings above $250,000 for single filers, and $400,000 for those filing jointly.
The marginal tax rate means the majority of the program’s revenue is paid by filers earning more than $500,000 annually. So it was noticeable when, in 2022, the number of filers from that category declined by roughly 14 percent compared to the year before. In 2023, the number of filings from the highest-income tier increased again, but only by about 2 percent.
This discrepancy led to calls for change from some local business leaders and even Governor Tina Kotek. Last year, Kotek requested Multnomah County leaders make changes to the program due to her belief that “the PFA tax is creating an environment that discourages higher income earners, and any businesses that may be associated with those earners, from staying or locating in Portland.” She cited the county’s own data, which showed a drop in the number of filers earning at least $500,000 between 2021 and 2023.
Portland Metro Chamber President and CEO Andrew Hoan is another vocal skeptic of the PFA tax. Last year, he told Willamette Week that there were “years of clear and irrefutable data [indicating the tax] is having an impact on our highly mobile middle class and higher-income earners who are choosing to leave.”
Hoan maintains his concerns, despite the new county data. In a March 5 comment, Hoan told the Mercury that “it is no accident that Multnomah County is deep in economic recession while surrounding counties like Clark County are seeing economic success – it is our policy choices.” He pointed to Preschool for All, as well as Metro’s Supportive Housing Services marginal income tax, as examples of the policy choices he believes have caused wealthy people to leave the Portland metro area. The Metro Chamber uses IRS data, which isn’t as up-to-date as county tax return statistics, to support their conclusions.
“The economic data speaks for itself – our economy is suffering, and we must reevaluate how we fund programs if we want to reverse our downward economic trajectory,” Hoan said. “We can have important services like preschool without funding it in a way that kills our economy. We reject the utterly false choice, and we call for a better way.”
Many residents have been alarmed by the notion that the universal preschool tax was driving away the taxpayers whose incomes are needed to support key social services. But such confident claims struck others as dubious, considering the limited data available. Still, the fear of losing Portland’s biggest tax base has driven efforts to change the Preschool For All tax by indexing the tax to inflation, cutting a planned rate increase, or killing the program altogether. Preschool for All supporters say the former two moves would also be an effective death sentence for the nascent program.
Matt McNally, communications advisor to Multnomah County Chair and Preschool for All champion Jessica Vega Pederson, said the new data should prompt reconsideration of the narrative that the program is causing high earners to leave the county.
“Some business lobbyists have harped on this argument that PFA is causing tax flight among our highest-income earners, and expressing concerns that it erodes our tax base for all the public services that folks in the region rely on,” McNally told the Mercury. “That would obviously not be a good thing.”
McNally said it’s the change from 2021 to 2022 that “some people have pointed to as irrefutable evidence for tax flight.” Now, he said, there’s data to refute that.
Beyond concerns about tax flight, the Preschool for All program has faced criticism for its rollout, which has been rocky at times. In 2022, county leaders rolled back initial program enrollment goals, citing continued impacts of the pandemic on the availability of childcare providers.
Program leaders say that’s changing, too. Late last year, the county announced plans to double the number of seats offered to early education providers for the 2026-27 school year. County officials say at this point, the concern is less about supply, and more about making sure people know the program is available for families of all income levels and demographics.
Still, while the 2024 data shows an increase in the number of filers making more than $500,000, the overall number of filers declined slightly compared to 2023. The total revenue raised was higher than 2022 and 2023, but lower than in 2021. Jeff Renfro, Multnomah County’s economist, chalks that discrepancy up to people filing their taxes late, as the county has seen in years past.
“When this data is updated again, these late filers will likely increase the total number of filers to show a year-over-year increase, just like last year,” Renfro wrote in a February email to county commissioners.
County commissioners are expected to hear a Preschool for All forecast update, which will include information about the 2024 tax data, later this month.
