Adams wants to restructure Portland's business income tax

Proposal would reduce fees for small businesses but raise those for large firms

Portland City Commissioner Sam Adams is proposing a restructuring of the city's business income tax that he said would result in reduced city taxes for more than 9,000 city businesses.

At the same time, about 900 very large city businesses that currently pay the minimum city business income tax of $100 a year would see their annual city business tax bill increase to $1,000.

'The goal that I am for here is tax fairness - to bring more perfection to the city's BLF tax,' Adams said, referring to what the city calls its business license fee but what in essence is a business income tax. 'What I'm proposing isn't perfect, but it's more perfect in terms of its equity.

Businesses with the ability to pay should pay more. And businesses that consume more city services should pay more. My proposal moves our tax system in that direction.'

Adams' draft proposal, which he first revealed Wednesday, would use more than half of a projected city budget surplus - city officials estimate a budget surplus of $7 million next year - for business tax relief. He said the tax reductions in his proposal would amount to about $5.2 million.

One primary way Adams' proposal would reduce individual businesses taxes would be by increasing the allowable deduction for owners' compensation that business owners can take before their city tax is calculated. Adams' proposal would raise that deduction from $60,000 to $125,000.

The tax reductions would be paid for by using about $4 million of the ongoing projected surplus and by collecting $1.2 million more in taxes from some large city businesses, Adams said. Those would be businesses that generate more than $20 million in revenues, but that pay the minimum business license fee of $100.

The city tax is imposed only on a business's local revenue, so large manufacturers that make most of their sales outside of Portland have very low city income tax bills.

City business leaders have for years complained the city's business income tax discouraged businesses from locating in Portland, and discouraged entrepreneurs from growing businesses in the city.

'I think (the changes) will stimulate the economy, and will grow the economic base,' Adams said.

Adams said city Commissioner Randy Leonard has indicated to him that he will not support the proposed tax changes - 'his genuine concerns are about unmet needs and responsibilities for city government' - but said Mayor Tom Potter and the other two commissioners have given him 'encouraging comments.'

In a statement issued Thursday, Potter indicated he supports Adams' goals, but added that the $7 million budget surplus projected for next year may not be available in years when the local economy is slower.

"It's a good start at finding ways to make the tax more equitable for all businesses, but there are still key questions unanswered, including how you pay for it in both good times and bad," Potter's statement said of Adams' proposal. "In lean years, you'll have to tap the General Fund. If you tap it for $4 million, that's $4 million less for basic services."

Adams said he hopes the city council would consider his proposal before Jan. 1, and possibly as early as Nov. 29.

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