Tax talk starts a 9-week run-up

Crusaders rally for both sides of a likely county tax levy

Even as city and county leaders were molding and remolding their unprecedented local tax package this week, political consultant Liz Kaufman was searching for campaign office space.

Portland business leaders were fielding quick calls from City Hall staff members, who wondered how much money they might provide a pro-tax campaign.

And local businessman Ted Piccolo and others, trying to focus on a continually moving but much-hated target, were threatening an opposition campaign to any new taxes.

The Multnomah County tax hike campaign Ñ what is likely to be an intense, expensive and noisy nine weeks Ñ has now begun.

This week, the Portland City Council and the Multnomah County Board of Commissioners each gave initial approval to parts of a $422 million proposed tax package made up of a temporary increase in the city's business income tax and a proposed 1.25 percent temporary income tax surcharge for Multnomah County residents.

County residents probably will vote May 20 on the income tax surcharge, which would provide roughly 91 percent of the revenue from the tax package.

The tax package would raise the money during the next 3 1/2 years to bolster what local leaders say are the dangerously meager budgets of local schools and public safety and social service agencies, all suffering from significant state budget cuts. More than $300 million of the money would go to schools.

City and county leaders, guided in recent weeks by privately funded polls, tried to shape and shift the package to keep the broadest support for it Ñ including that of Portland school district parents worrying about a $60 million budget hole next year; other county school districts; public safety, social service and labor leaders; and Portland business leaders.

And recent shifts in the proposal toward more income taxes and smaller increases in business taxes came about because support from the last group is vitally needed, especially from leaders of the Portland Business Alliance.

Alliance leaders now say they will give significant help in raising the $500,000 to $600,000 that advocates are assuming the tax campaign will cost.

'Fund raising is the key,' Sam Adams, chief of staff for Portland Mayor Vera Katz, said outside City Council chambers shortly before the council approved increasing city business taxes as part of the package Wednesday. 'And the biggest bucks come from the business community.'

The package proposes to raise $20 million from increased business income taxes this year, an amount that would help the Portland school district avoid cutting its school year short. The package then proposes a smaller hike in business income taxes during the next three years to raise $6 million each of those years.

The increases will be part of longer-term city and county business tax reform, which will bring lower business income taxes along with new business payroll taxes.

Businesses begin to grumble

City and county leaders shifted toward smaller tax increases after reviewing some private poll results and getting 'a sense that citizens here are nervous about taxing their employers too high and losing their jobs,' Katz said Wednesday.

Kaufman, who helped run the campaigns last year that convinced local voters to approve property tax levies for libraries and parks, said the campaign will be difficult even with a well-funded pro-tax campaign.

'I don't think that it's the hardest thing we've ever faced, and I don't think it will be easy,' she said. 'I think it will be tough because these are tough times.'

Opponents of any increased local taxes agree with the last part.

'There's only so much blood you can get out of an onion, and this onion's just about dried up,' said Don Riddle, owner of Applied Plastics in Southeast Portland.

Riddle said his company has cut its work force from 34 to 10 during the last 2 1/2 years because of the weak economy. Local companies will begin moving out of Multnomah County rather than pay more taxes, he warned.

'I believe that they'll drive us clear out of here,' he said.

Piccolo, a former Portlander, a longtime critic of city government and now a business owner in Sandy, has helped form a political action committee called Jobs Portland in large part because of business opposition to proposed new business taxes.

Piccolo said committee leaders will campaign against any new business taxes. He doesn't know whether his group will oppose a county income tax increase.

Everyone would pay

The 1.25 percent increase in county income taxes would be for all tax brackets. A person with taxable income of $30,000 would pay $375 more each year in taxes Ñ to the county Ñ if the proposal is approved.

The income tax would raise $128 million annually. Tax package advocates will use volunteers, direct mail and probably television advertising in an effort to sway voters. Their mission will be to show that the money would go toward preventing early county jail releases, funding basic services for mental health patients and helping Portland schools avoid severe budget cuts.

It's a message that Portland Business Alliance executives are now giving as well.

'Having a well-funded and quality public school system in this city is critically important to our economy,' said the alliance's Greg Peden. 'I've talked to people who recruit business executives to move here to run a business, and that's one of the first questions they ask: 'What is the public school system like?'

'You cannot overtax the business community, particularly in a recession,' Peden said. 'And we also can't let the schools fall apart.'

But some tax opponents said the larger issue is: How much more will county businesses be willing to pay in taxes before they pack up and leave the county?

'The pro-tax group wants to paint it as business against education, and that's just not true,' said J.P. Moss, owner of several Portland swimwear shops and a former City Council candidate who says he will help Jobs Portland raise money for its opposition campaign.

'But as you tax businesses more, when they're already reducing jobs, where is the money going to come from?'