County finds a collector for income tax: the city
Payroll withholding for new tax won't be ready until fall
Portland's Bureau of Licenses will handle collection of Multnomah County's new income tax under a deal that should be wrapped up by the end of July.
The city agency has expertise in collecting taxes because it administers Multnomah County's business income tax as well as the city's own business license fee, said Dave Boyer, Multnomah County's finance director and the man charged with getting the tax up and running.
The intergovernmental agreement will be the first step in laying out how the county will collect what could amount to $135 million a year in new taxes. Plans for withholding by employers, quarterly payments, and preparation of tax and instruction forms are also in the works.
But the agreement with the city comes first.
'They have the tax auditors. They have the policy people. They have the expertise,' Boyer said. 'We've come to an agreement in concept and almost in language. There's like two or three paragraphs we have to work on.'
In May, Multnomah County voters authorized Oregon's first county income tax. It's temporary, running for the 2003, 2004 and 2005 tax years, with the money going to schools, human services and criminal justice.
Taxpayers may get a dose of sticker shock at least in the first year of the tax. Payroll withholding won't be available to employers until August or September. That means taxpayers will have to reach deeply into their own pockets when the tax comes due next April 15.
Boyer said he expects approval of the agreement from the Multnomah County Board of Commissioners and the Portland City Council by the end of July.
Under the agreement, the county will pay the city about $3.6 million a year to collect the tax, not the $7 million estimated in the spring. Of that, $1 million to $1.3 million will be needed to set up the computer system, create the forms and get new space for the 15 to 20 new city employees needed to process the tax.
The bulk of the money, in fact, will go to pay for those hires, with the county reimbursing the city for the cost. The employees probably will stay on after the county income tax expires in three years and replace workers lost to attrition, said James Wadsworth, director of the city's Bureau of Licenses.
The city will operate the service at cost and won't make a profit, he added.
First things first
Boyer also set out several priorities for the months ahead:
• By the end of July, the city and county hope to begin withholding county income taxes from the paychecks of their employees who live in Multnomah County. This method will serve as the test case for the withholding system
• By August or September, the county hopes to have the withholding system available for all county employers that want to use it. 'They're anxious,' Boyer said. 'We've had a lot of calls.'
• By Sept. 30, the method for making quarterly tax payments should be in place.
• By Oct. 15, a system should be in place for employers to send the withheld taxes to the county.
• By early or mid-December, tax forms and instructions should be ready.
The state Legislature already has offered some help. Both the House and the Senate passed a bill giving county officials access to state tax records. That way, the county can find the name of every Multnomah County resident who filed an Oregon income tax return last year. The governor is expected to sign the bill.
Wadsworth doesn't expect significant disruptions in the Bureau of Licenses as it assumes the new tax collection duties. On one hand, he said, the process will mean dealing with a completely different tax code and working in cooperation with the county and the state Department of Revenue. But the city is familiar with many of the procedures, such as collecting quarterly tax payments on the business taxes.
'We have many similarities,' he said, 'but there are differences, too, and they'll take additional work to make them work as efficiently as we have the business taxes working.'
No double taxation
Boyer said the county is also still working out a formula for providing a rebate to Multnomah County residents who live in the Beaverton School District. There aren't a lot of them. Only about 90 Beaverton students live in Multnomah County.
As the law stands now, those property owners will pay the new county income tax, but the money won't help their schools. On top of that, Beaverton School District voters approved new taxes of their own in May. The rebate will make sure that they don't pay taxes for someone else's schools.
'There will be no double taxation,' Boyer said.
Boyer said the formula will be devised to kick back to them the portion of their county income tax that goes to schools. Those residents will still pay for the county's nonschool services covered under the new tax.