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Opposition to payroll tax increase

July 29, 2015

Cascade-PolicyBy John Charles
Cascade Policy Institute

At Wednesday’s TriMet board meeting, Cascade Policy Institute President John A. Charles, Jr. presented a detailed critique of TriMet’s proposed tax increase, and urged the Board to cancel public hearings on the tax proposal set for August and September.

Over the past several months, TriMet has been quietly meeting with business associations and large employers in efforts to gain political support to raise the rate of the regional payroll tax it imposes on most employers within the transit district. The current rate is 0.7237 percent. The proposal is to raise it by 1/10th of a percent, phased in over a ten-year period.

TriMet expects to have the first reading of the proposal on August 12, and a Board vote is scheduled for September 23. If approved, the rate increase will go into effect on January 1, 2016.

In his testimony, Charles pointed out that the last time TriMet increased the tax rate – the period of 2005-2014 – total operating revenues for TriMet increased by 80%, but actual service declined by nearly 14%. This was contrary to promises made by TriMet management in 2003 when the legislature authorized the tax rate increase.

Charles also reiterated that TriMet’s cost of employee benefits is unsustainable, with the cost of benefits equaling 149% of the cost of wages in 2014.

In addition to financial issues, the effectiveness of TriMet service is declining. According to TriMet records, ridership in 2014 was lower than it was in 2007, despite an increase in regional population. TriMet’s market share is also dropping. Portland commuters used transit for 12% of trips in 1997; in 2014, that number had dropped to 11%.

According to Charles, “TriMet thinks that the most recent labor agreement solves its employee compensation problem. It doesn’t. Until the cost of benefits drops below the cost of wages, TriMet has no moral authority to impose higher tax rates on local employers.”

The full critique of TriMet’s proposal can be viewed here.

  
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