The city of Salem is facing a massive budget shortfall. To help close it, the City Council recently approved a tax on anyone working in Salem who earns above the minimum wage. City officials claim the tax is needed to maintain and expand emergency services, including hiring more police officers, firefighters and sustaining homeless services. Oregon Business & Industry successfully petitioned to put the issue before Salem voters in a special election this November.
Virginia Stapleton is president of the Salem City Council and co-founder of the Committee to Save Salem, which supports the ballot measure. Preston Mann is the political affairs director of Oregon Business & Industry which has raised more than $180,000 to defeat the measure. They join us to share opposing perspectives on the tax which has been extensively covered by the Salem Reporter, including an Oct. 11 town hall it moderated with Stapleton and Mann.
The following transcript was created by a computer and edited by a volunteer:
Dave Miller: From the Gert Boyle Studio at OPB, this is Think Out Loud. I’m Dave Miller. The City of Salem is facing a major budget shortfall, $16 million for the current fiscal year. To help close it, the City Council recently approved a tax on anyone working in Salem who earns above the minimum wage. City officials say this payroll tax is needed to prevent the loss of emergency services. But the statewide lobbying group, Oregon Business and Industry, disagrees. They say the tax is too high and too complicated. They put the issue before Salem voters in a special election. Ballots are due November 7th. That is two weeks from today.
We’re going to get opposing viewpoints on the tax right now. Virginia Stapleton is in favor of the tax. She’s the president of the Salem City Council. Preston Mann is against the tax. He is a political affairs director of Oregon Business and Industry. It’s good to have both of you in the studio.
Preston Mann: Thanks for having us.
Virginia Stapleton: Thanks.
Miller: Virginia Stapleton, first. What does a $16 million budget cap actually mean? I mean, if no new revenue were to come in, if the answer is no on this tax, what would change for Salemites?
Stapleton: We’re looking at, right away, a lot of cuts to our internal support services as well as reductions in library services and park services as well as increased fees for park usage and our Center 50+ which serves, of course, our older population.
Miller: What about fire and police? Are you talking about not being able to add positions you want to or actually getting rid of current positions?
Stapleton: Right. It’s going to be a combination of both. Right now, we have been holding off on hiring a lot, especially in our fire department, because of the uncertainty in our budget. So, right now, I think we have about 17 vacancies which we could easily fill. But we’ve been holding off on that. So the first round of cuts to that department will look like reducing those vacancy positions. Of course, that puts an increased strain on the folks that are currently working. And in our police department, it’s a little bit different. We will be reorganizing people. And so people will be losing services within the city because of those folks being redistributed throughout the organization.
Miller: Preston Mann, do you disagree with anything that Virginia has said so far? Sometimes, in these debates, there isn’t even a shared agreement on the numbers before we get to the potential solution. So where are we here?
Mann: There’s no question local governments across the state are facing their own unique budget challenges. Salem is no different. But you asked what would change if this tax passed or didn’t pass? And I think you also have to ask the question, what changes for Salem families if this tax is on the books. And for Salem families, there’s a significant cost associated with this tax.
Miller: We’ll get to that. Those are huge questions that I want to get to. But do you agree that the City of Salem needs to raise more revenue?
Mann: I think that’s a conversation for the community to have. I’m simply here to put a tax on the ballot. I think the tax that’s on the ballot is the wrong approach. But the City’s Revenue Committee identified 11 other potential solutions. I think those should be explored. But I think we should also recognize that our Governor has said, on repeated occasions, she acknowledges the city’s unique concern in this case as it relates to unpaid property taxes. She herself has said she’s likely to vote no on this tax. But I think we’ve got a willing partner at the highest level of our state government who wants to engage the city in a conversation about how to solve this budget gap.
Miller: Virginia Stapleton, we could spend the whole hour, we could spend days, talking about Oregon’s property tax history. You spent a while when you had an hour and a half for the two of you to talk about that. I’m gonna see if I can do this in 45 seconds to concentrate this conversation into proactive questions, going forward.
But Measures 5 and 50, which Oregon’s voters passed in the 1990′s, limited the ability of local governments to increase property taxes. It made it so that, in many cities and counties including in Marion County, a new operating levy theoretically could pay for various city services [but] wouldn’t actually raise taxes on some residents, because some residents are already paying the maximum allowed under state law. That, as I understand it, is why you and city leaders have opted for a payroll tax.
I understand that rule making, if voters say yes to it then, would actually decide a lot of the specifics about how the tax would work. But what can you tell us now about how it would work?
Stapleton: So right now, I think what’s really interesting about the payroll tax and what is attractive to us as a city council and why we passed it, is to bring back what Preston was just talking about the state and all of the other nonprofits, churches, et cetera that are in the [state’s] capital but are not paying property taxes. If we were to pass a payroll tax, then the people who work at those locations would also be paying into the system that they are using. So for every worker that is in the City of Salem, they would pay this tax. And the idea is that while you are here, you are using the resources. And if you needed medical care, you would call 911 and we would respond. So everybody working within the city limits would pay the tax. So that’s basically how it would work.
Miller: Preston Mann, one of your arguments is that this tax would be too complicated to administer in terms of who would pay the tax, when, and for what work, where, to use a lot of “w” words all at once. Can you explain your argument?
Mann: Yeah, I think it’s an extremely complicated tax. It’s one of the most complicated pieces of tax policy I’ve ever seen. And from my perspective, it simply doesn’t work. You don’t cross a red line every time you enter or exit the city of Salem or any other jurisdiction.
Miller: You mean you don’t cross a city line, correct? But you do cross a jurisdictional line.
Mann: But how’s a pizza delivery driver to know when they’ve crossed the city line or not? How are they supposed to keep track of when they’re within the city limits or when they’re not? How’s the employer supposed to keep track of that? How, frankly, is the city supposed to know if employers and employees are presenting an accurate representation of that time when nobody really knows how to track it.
Miller: So for the pizza delivery example, Virginia, let me go to you. So, first of all, what’s your response to what Preston just said?
Stapleton: This has been a conversation for us in all of the different debates that we’ve had. And for us, we recognize that there are folks who work, especially like a delivery service, that that might be challenging to try and figure that out. I am fully confident in our abilities, through the rulemaking process, to either set a minimum or some other function within the rulemaking process, that would help alleviate that strain or that area of confusion. [It’s] completely normal in that process to work with people in the community that are struggling with it and come up with a solution together. And I think I’m fully confident that we can do that.
Miller: Preston, do you have a sense for the percentage of workers for whom the complications you’re bringing up for whom that would actually apply?
Mann: I think it’s impossible to know because there’s no parameters as it stands right now on when this tax kicks in. So let’s say you’re hosting a conference at the Salem Convention Center. Are you taxed on those wages right now? The way the ordinance is written, the answer is undoubtedly yes. So, I mean, the number is almost infinite. Is a truck driver passing through I-5 subject to the tax? With the way the ordinance is written, yes.
Miller: Virginia Stapleton?
Stapleton: I think that that’s kind of an extreme example. I think that’s something that we can definitely work out. I would say that the majority of people who have brick and mortar or work in the city of Salem, it’s going to be very simple for them. If they own a business in Salem, all of their employees work in Salem, it will be a very straightforward process. We recognize that there are issues within different types of delivery systems. And for folks who have a complicated part to this, we’re ready and willing to work with them.
Miller: As you just heard from Preston, and as you’ve heard before, he says this is one of the most complicated to administer taxes he’s ever encountered. Have other Oregon jurisdictions set up a payroll tax in an identical or very similar way?
Stapleton: I wouldn’t say it’s identical. For instance, we talk a lot about Eugene’s. Theirs is an employer and an employee payroll tax. It is a much lower rate than ours. And so it’s different in that way.
Miller: But specifically, this question of where somebody is working ‒ because if that’s one of the biggest critiques that we’ve heard from Preston so far ‒ how have other jurisdictions handled that, of who is working where, when?
Stapleton: I’m sorry to say I can’t answer your question. I don’t have that information. All I can say is that we’re really honestly open to working with these communities that are going to be impacted and try to find solutions.
Miller: What was the idea of not figuring that out before? I mean, one of the things I’ve heard before from Preston is that you’re asking voters to trust you, to say yes to the tax, and then the rule making will figure out the nitty gritty details. Why not figure out some of those details first?
Stapleton: My response to that has always been that this is not the way that it has really ever been done, right? I mean, when our state legislature passes something, then it goes into a rulemaking process and that process can take a long time. And a lot of people are… industries are there at the table. And they come to solutions on how it’s going to be implemented. I think that’s the standard way that it’s always been done.
And I have leaned on that process throughout this whole time.
Miller: Preston, another one of your big arguments is that this tax is too high. I want to drill down into that. The tax in question is 0.814%, which I have read and heard that for the average person who pays the tax, it would be around $500. So, if that’s too high, what wouldn’t be too high? What is a level that would make you at OBI say we’re maybe not going to support it, but we’re going to hold fire and not raise $180,000 to fight it?
Mann: Well, just to be clear, there’s no scenario where we would be supportive of a tax that’s structured like this. You asked a question about if there are any other taxes around the state that are similarly structured. The answer is no, not that I’m aware of. And so, if the premise here is that, well, is there a different rate with the same tax that we could move forward with? The answer is no. But even at 0.814%. You know, that doesn’t sound like a lot, maybe on paper, but over $500 a year for families right now is a lot of money. Inflation is at an all time high. Gas prices are high and housing prices are at all time highs. Folks are struggling. And as much as I am sympathetic to the city’s concern about the city budget, I’m even more sympathetic to family budgets right now.
Miller: So let’s, as a kind of thought experiment, say that there were a different mechanism that you found to be less problematically complicated. Is there a number, an annual number, for the average taxpayer, that would make you say we will not fight this. You’re saying $500 on average is too much. What about $400? What about $300? What about $200?
Mann: I’m not going to sit here and put a number on it today. I think the city council is meeting tomorrow to discuss a number of different paths forward. I’m happy to participate in those discussions moving forward. I think I’ve heard from literally hundreds of members of the community who are also willing to participate in that discussion. But right now, folks have ballots in hands for Measure 24-491. It’s the wrong approach for Salem.
Miller: I mean, that does go in line with what you said earlier when I [asked] if you agree that that revenue needs to be raised? And since you said, let’s not talk about that, let’s talk about this measure. But as Virginia and others have said, we’re in a kind of crisis now and without new revenue, we’re gonna have to make cuts to services. I’m still wondering what your position is on that?
Mann: The employers that I’ve talked to, the residents that I’ve talked to, I believe many of the 13,000 people that signed the petition to put this on the ballot, they all wanna see safe communities. They all want to see our fire stations funded. They all want to see our police officers fully funded. So I believe this community is supportive of making sure the budget is fully adopted and implemented. But we’ve seen this community rally around major revenue increases in the past. Just this past November, the city of Salem passed a $300 million bond and I understand those are different dollars used for different purposes. But I think it shows that when the city makes a compelling case to residents of the community that this revenue is needed, the city is willing to say yes. I don’t think that’s gonna be the case with this particular tax.
Miller: What can you imagine you would support if you’re saying that we do value safety and public services, but this is not the way forward. This is not the right way. What would you support?
Mann: Look, I’m reluctant to speak on behalf of the 13,000 people that signed that petition.
Miller: What about just as a Salemite?
Mann: Sure, from my perspective, I’m a big fan of levies. I think levies require a conversation from local governments and voters. They’re required to be reauthorized.
I think that’d be a better place to start.
Miller: Virginia Stapleton, your response?
Stapleton: Yeah, levies are a hard thing because Marion County is already experiencing compression, which means we’ve hit that max. We’re over the $10 mark. So that would mean only a certain amount of people and would be very unfair to our Polk County side of the city. We’re in two different counties. They would bear the brunt of paying for that levy. So, it would not be equitably spread out around the city and for people using the services.
Miller: Unless my numbers are wrong here, unless these have changed in terms of state reporting, Virginia Stapleton, your side, the “yes, let this tax stand” side, has raised around $6,000 to your opponents $180,000. That’s not voting, that’s money. But there often is a connection between financial support and what happens at the ballot box. Does that make you and your fellow supporters think that, in fact, this is not going to pass?
Stapleton: You know, when we were in the beginning of this process, I was very reluctant to have this go to the voters for this one reason. Because I knew that I would not be able to get enough support or rally enough support for something. Anybody who wants to raise taxes is going to face this really uphill battle because who’s going to donate money to a campaign that wants to raise taxes? That’s just hard. And I’ve talked about this so many times. It’s so much harder to be for something than it is to be against something. It’s really easy to just throw up your hands and say “just vote no,” because that doesn’t actually bring any solutions to our city and it doesn’t actually take full responsibility for the consequences of that “no” vote.
So that’s why it’s easy for outside groups to throw in money towards a “no” vote. They just don’t want it. It’s much harder for people to rally around the really complex reasons on why we need this, how we got here, what the consequences are going to be if this does fail. That is a much harder thing to sell and to rally people to give their hard earned money for. Traditionally businesses are not going to be supportive of increased taxes.
And that is what is funding the ‘no’ campaign.
Miller: I was trying to push Preston, as you heard, on what about $400 on average? I mean, basically lowering the percentage of a tax. Is that something that you and your colleagues would consider if this were to fail?
Stapleton: If this fails, we’re just gonna have to be right back to the drawing board. Everything is on the table again. The reason why we chose the rate that we did is that it exempted those minimum wage workers. And it also protected our unhoused programs which we feel are vital for the thriving nature of the city of Salem right now. We have to have those critical services. And so not only does it protect the livability of the city, things like parks and libraries and, of course, our emergency response with police and fire. But those unhoused services are just so critical to everything in the city of Salem, whether it’s neighborhoods, businesses, all of those combined. So that’s the reason why it was set so high. We could have conversations, of course, to talk about what we can cut and how we could drop that rate.
Miller: Preston Mann, are members of the Salem business community that you talk to, are they preparing for budget cuts to come at this moment?
Mann: The employers that I’ve talked to are very prepared to engage with the city about what’s next. I think some of them are frustrated that we are waiting for the inevitable before that conversation starts, the inevitable being the failure of this tax. If the situation is as dire as the city council suggests, and I have no reason to doubt them, why aren’t we having conversations today about what takes place after this tax fails?
Miller: Are those conversations happening right now?
Stapleton: Yeah, we recently had a work session about a month ago. We have another work session planned for tomorrow. So, I’m sorry Preston, that it can’t be today. But it will be tomorrow at our work session. I invite everybody to tune in to really hear what the impacts are gonna be.
Miller: Virginia Stapleton and Preston Mann. Thanks very much.
Mann: Thank you.
Stapleton: Thank you.
Miller: Virginia Stapleton is the president of the Salem City Council and co-founder of the Committee to Save Salem. It supports the payroll tax measure. Preston Mann is the political affairs director of Oregon Business and Industry. It is a statewide lobbying group that has been the main sponsor of the ballot measure to bring down this payroll tax measure.
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