Business Tax Defeated in Salem, OR
Posted by Pam Leavitt on November 8, 2023
Update from Oregon Business & Industry: Salem residents defeated an employee payroll tax the City Council adopted in July. According to early returns, which include a majority of ballots submitted, the margin of failure was overwhelming. In Polk County, which includes west Salem, 84% of voters rejected the tax. And in Marion County, 82% of voters rejected the tax. While OBI understands the budgetary pressures many local governments face, today’s results underscore the need for local leaders to work in good faith with their constituents when seeking to raise additional revenue.
Consider some of the worst features of Salem’s failed employee payroll tax:
- At nearly 1%, it would have placed a significant burden on people who work in the city even as inflation continued to raise the price of food, energy and essential services. The tax would have cost a worker making the city’s average wage about $500 per year.
- Because the tax would have applied only to work performed within city limits, it would have placed an unreasonable tracking and compliance burden on employers. Imagine running a regional plumbing business that does work occasionally within the city.
- It would have set a bad precedent, and other cities facing budgetary pressure might have been tempted to follow suit. How long would it have been before employers had to track hours worked in several cities in the same region?
- The tax would have applied not only to large businesses, but also to self-employed people, imposing a tracking burden many people are ill-equipped to shoulder.
Oregon businesses have endured soaring taxes in recent years, as detailed in a 2022 report prepared for OBI by accounting firm Ernst & Young. Driven in large part by the corporate activity tax and the Paid Leave Oregon payroll tax, state taxes boosted Oregon’s total effective business tax rate by almost 43% from 2019 to 2021.