Mary C. King
King is professor emerita of economics at Portland State University. She lives in Portland.
Under pressure, Multnomah County Chair Jessica Vega Pederson has proposed a one-year delay of the small 2026 bump in the Preschool for All tax resoundingly supported by voters. Postponing the increase is a bad idea based on a flimsy rationale.
Major investments are needed over the next few years in both the preschool workforce and facilities. Research shows that every dollar spent on strong preschool programs returns $7 to $12 to the community. Our local childcare “system” was skeletal even before Multnomah County lost a fifth of providers during the pandemic. It’s just luck that we had some big years of income tax revenues, locally and nationally. A few strong years are no reason to risk the program’s future.
Despite anti-tax rhetoric, we do not have the highest taxes in the country. When factoring in property tax, income tax and other assessments, Oregon’s state and local taxes are just two-thirds of New York’s, per person, and four-fifths of California’s, according to the Tax Foundation. We have no sales tax, making our taxes fairer than most states. The less money you have, the larger the percentage you’ll pay to a sales tax. Avoiding a sales tax also holds business taxes down. And some places levy taxes we have barely considered, such as San Francisco’s taxes on off-street parking, Uber and Lyft rides, sugary beverages and residences that are vacant for more than half the year.
Only one tax rate on households with the very highest incomes is relatively high in the Portland area, though lower than in New York City. That’s the combined state, Metro and Multnomah County income tax rate paid by the very affluent who pay the highest tier of the Preschool for All tax. That rate applies to income, after deductions, that’s over $250,000 for an individual or over $400,000 for a couple. For perspective, half the households in Multnomah County have incomes of less than $84,000, about one-fifth of the $400,000 threshold. (The Metro and preschool taxes also apply, at a lower rate, on tax filer incomes over $125,000 for individuals and $200,000 for couples).
Prioritizing fairness by taxing at the top means that revenue varies, in a way that’s hard to predict, especially for capital gains income. The solution is to build a big reserve, to maintain service during lean years. Fortunately, record-setting high incomes gave Preschool for All a solid head start.
We can’t expect revenues to stay at the level hit in 2022, based on 2021 incomes. The Congressional Budget Office reported that capital gains incomes in 2021 hit their highest level in more than 40 years. We may also experience tax evasion, requiring greater attention to collection enforcement in the future. Nationally, tax evasion by the 5% has risen considerably since the early 1970s, reaching levels double those of other income groups, according to economists Emmanuel Saez and Gabriel Zucman.
Preschool for All has just begun to make desperately needed investments in teacher compensation, professional development and facilities. Quality in early childhood programs rests on retaining skilled, experienced and dedicated teachers, impossible with the poverty-level wages prevalent in the industry. In the metro area, only one in seven people with college degrees in early childhood work with young children, according to economist Catherine Weinberger. The rest have been pushed out by low pay and challenging working conditions.
While the governor’s task force on downtown revitalization calls for a pause on new taxes, it’s highly unlikely that rising office vacancy rates downtown are due to the preschool tax. Portlanders enthusiastically adopted working from home to avoid the time, expense and aggravation of commuting. Dire poverty in the streets is distressing, as our local governments struggle to do the job of the federal government, which has been missing in action on housing and mental health needs.
Multnomah County’s new Preschool for All program caught national attention. As noted by The New York Times upon passage in 2020, it could be a model for the country if implemented as planned. We can’t let a delay in the funding needed to go to full universality by fall 2030 lead to any further chipping away at a program so important for our children, families, community and the future.
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