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City Tax Options for Saving Schools

The Eugene City Council is considering a variety of city tax options to help local schools facing severe budget cuts.

The mayor and a city councilor have reportedly asked city staff for information on several tax options including a graduated income tax, a flat income tax and a restaurant tax.

A progressive, graduated city income tax with rates set at 0.5 percent for income (AGI) $50,000 to $99,999, 1 percent for $100,000 to $249,999, and 1.5 percent for incomes more than $249,999 would generate roughly $40 million per year. That's based on an EW analysis of state tax data that assumes Eugene has a similar income distribution to Lane County and generates about 63 percent of the Adjusted Gross Income in the county.

A flat 1 percent income tax would generate roughly $44 million a year for local schools, according to the EW analysis.

A 5 percent Eugene restaurant tax would generate about $4 million a year, based on adjusting a previous city staff estimate of restaurant tax revenue to account for growth. The 4J school district may cut scores of teachers and effectively limit school to four days a week to close a $22 million budget deficit. Bethel also faces millions of dollars in cuts.

Based on local voting experience, a graduated, progressive income tax could be the easiest to pass.

Last year a state income tax increase on income over $250,000 passed three to one in Eugene.

The proposed graduated tax on incomes above $50,000 in Eugene would impact roughly a third of local taxpayers, according to EW's analysis. The proposed 1 percent flat tax on all incomes would impact all voters, but would generate only 10 percent more revenue than the graduated tax on incomes above $50,000.

If the graduated tax were limited to incomes above $70,000, the tax would impact roughly 20 percent of taxpayers and generate roughly $22 million a year. A graduated tax above $100,000 would impact roughly 10 percent and generate roughly $19 million a year.

A proposed flat county income tax to fund the jail failed two to one in Eugene in 1999 amid criticism that it was unfair to the poor and emphasized prisons over crime prevention and treatment.

A proposed 5 percent Eugene tax on restaurants in 1993 to help with a city budget deficit, failed by a 20 percent margin. Restaurants organized to oppose the tax which they argued could send business outside city limits and citizens expressed concern it could unfairly impact the poor, who spend about a third of their limited income on fast food.

To refer a city tax measure to save local schools to the May ballot, the Eugene City Council will have to vote for the referral by the middle of next month.