The Latest “Street Fee” Proposal Scraps an Income Tax. Sort Of. Unless There’s Opposition

• Illustration by François Vigneault

Bowing to pressure from Portland’s business community, City Commissioner Steve Novick just announced a residential income tax is out—for the time being—as Portland struggles to find millions in new money to fix the city’s roads.

Instead, Novick and Mayor Charlie Hales will revert to a “user fee” on Portlanders—one that’s still tied to income. But Novick is explicit, in his announcement, that that’s because income can be shown to have real ties to gasoline consumption.

“Gasoline use is one proxy for ‘road use,’’ Novick says in the announcement, “and gasoline use varies somewhat by income level.”

As such, the user fee model tosses out exemptions for Portlander’s at the low end of the income scale. People making $13,000 or less would have to pay $36 a year, with the fee topping out at $144 a year for people earning $82,000 or more. Here’s the whole thing:

Novick says the model is good for $23 million a year. An existing fee structure for businesses is still on the table, and would rake in about the same.

The move away from an income tax has been rumored for weeks, and it’s the latest sign Hales and Novick are striving to push through a proposal that won’t be referred to voters. The Portland Business Alliance had railed against an earlier income tax proposal—one that was cheered by progressive groups throughout the city—and promised to put the tax to a vote.

The new “user fee” proposal will get a hearing before the city council on January 8. A vote is likely January 14.

But Novick’s also making clear in today’s announcement an income tax isn’t completely off the table. In fact, if the new proposal is stymied—either by failing to pass a city council that’s fairly divided on this matter or being referred to voters by some opposition or another—Novick says he’ll put all his weight behind a progressive income tax. Under that proposal, couples making less than $35,000 would be exempt from paying, and wealthy Portlanders would assume a bigger share of the burden.

Here’s what it would look like:

And here’s Novick’s take:

“My personal preference is for a progressive income tax, which is also the most popular option among Portlanders generally. But pursuing that option would involve a campaign that would not end until at least May, and possibly November of 2016 – which means postponing actual work to repair streets and make them safer.”

It shouldn’t be long now until we hear street fee opponents highlighting exactly what is terrible about this latest proposal.

For now, I’ve appended Novick’s full announcement after the jump.

(Side note: I’m writing this from Michigan. You have no idea about bad roads until you’ve been to Michigan. I’m being completely serious.)

December 29, 2014— As a year of debate over city transportation funding draws to a close, City Commissioner Steve Novick today announced a two-part strategy to ensure funding for transportation maintenance and safety priorities.

“We are proposing a revised residential user fee, with a hearing on January 8 at 6p.m. and a vote scheduled for January 14. If that fails, either in Council or through a subsequent referral to the ballot, we will prepare to campaign for a progressive income tax in 2016,” Novick said. The proposed non-residential fee is unchanged.

The proposed user fee will vary by income, based on national statistics showing the extent to which gasoline consumption varies by income quintile. “Gasoline use is one proxy for ‘road use,’ and gasoline use varies somewhat by income level,” Novick said.

Under the proposed fee, tax filers in the lowest fifth of the income distribution would pay $3 a month; filers in the second fifth would pay $5 a month; filers in the middle fifth would pay $7.45 a month; filers in the second-highest fifth would pay $9 a month; and filers in the top fifth would pay $12 a month. The fee is projected to raise $23 million per year.

If the user fee fails, Novick said, he plans to propose a progressive income tax to be sent to the ballot in May or November of 2016. “What I would propose is an income tax that, for married filers, exempts the first $35,000 in income, and then applies graduated rates as follows: one-tenth of one percent of income between $35,000 and $60,000; two-tenths of one percent of income between $60,000 and $100,000; three-tenths of one percent of income between $100,000 and $250,000; and four-tenths of one percent of income above $250,000.” Such a tax is also projected to raise $23 million a year. That proposal includes a $5000 per dependent deduction and is tax deductible on the state and federal returns.

“My personal preference is for a progressive income tax, which is also the most popular option among Portlanders generally. But pursuing that option would involve a campaign that would not end until at least May, and possibly November of 2016 – which means postponing actual work to repair streets and make them safer. As the Mayor and I have repeatedly said, the longer we wait, the worse the problem gets. It seems possible that we could pass a user fee in Council that would not require a campaign, which would mean that we could get to work much sooner,” Novick said.