Mayor Wheeler’s proposed budget includes an increase in the Business License Tax (going from 2.2 percent of a businesses’ net income to 2.6 percent). It also includes, as an offset, a 21% increase in the Owners Compensation Deduction (going from $103,500 to $125,000).
Impact to Your Business
The proposed tax increase is .004 (or an additional $4 per $1,000 in taxes paid). The City created a calculator to determine how the proposed changes will impact your business. A few example scenarios:
- $100,000 Net Income: Sole Proprietor would pay $650
- $200,000 Net Income: Sole Proprietor would pay $1,950
- $500,000 Net Income: Sole Proprietor would pay $9,750
Owners Compensation Deduction
The Owners Compensation Deduction currently allows business owners to deduct 75% of their net income, not to exceed $103,500 per owner, when filing their taxes. When the Owners Compensation Deduction had its last meaningful increase in 2014 (going from $92,000 to $100,000), the city estimated that more than 4,000 businesses would save $865,000 the year it went into effect. Please note, businesses grossing under $50,000 per year before expenses are exempt from paying the Business License Tax. For nonexempt businesses, the Owners Compensation Deduction allows them to deduct a portion of their net income pre-tax.
Proposed Use of Tax Increase
The Mayor expects the increased tax to generate $15 million/year. Per the Mayor’s proposed budget: “These changes [Business License Tax increase] would result in an estimated $15.3 million in additional revenues this year [7/1/18-6/30/19] to stabilize the budget for homeless services, invest more in moving people out of shelters and into housing, fund programs in the Police Bureau that support community-centered policing [add 49 Officers], add resources to trash and graffiti cleanup, and to provide additional small business support.” The Portland Business Alliance, which crafted the Business License Tax increase proposal with the Mayor, stated that the proposal: “also includes safeguards such as an annual review of program results, as well as a stated intention not to further raise the tax for at least ten years and to reconsider the increase if the tax environment in the city substantially changes.”
Action Needed: Like It, Hate It or Have Suggestions to Improve it – City Council Needs to Hear From You
Write a letter, call Commissioners or attend a Budget Hearing to let City Council know how your feel and what, if anything, you want in exchange for paying increased taxes. Letter writing best practices and City Council contact info can be found here and a sample letter can be found here.
- Budget Hearing – Wednesday, 5/16 at City Hall (2-4pm)
Information provided by Venture Portland.