Eastside Guy, featured in Brainstorm Magazine
Back in the nineteen twenties, when my Uncle and his partner were trying to eke out a living by wholesaling tools and hardware to local merchants off the back of a Model-T truck, they were accosted by a police officer. The officer asked to see their “Peddler’s License”. Since they didn’t have one, and didn’t know they needed one, they were restricted from doing business until they obtained one. Over the years the “Peddler’s License” evolved into the “Business License”. In most jurisdictions around the nation obtaining a business license involves making an application and paying a nominal annual fee.
Portland and Multnomah County have, over the years, departed from this traditional method of licensing businesses and created a combined “Business Income Tax/Business License Fee” (BIT/BLF). This system, which provides the city with about 15% of its general fund, punishes profit and wealth creation. It also punishes entrepeneurship by capping a business owners “fair” salary and taxing them on the excess.
The BIT/BLF works like this: The city and county get 4.05% of your net profit, and 4.05% of the owner’s compensation in excess of $57,500.00 per year if you are profitable. In the tradition of the “Peddler’s License”, you pay a minimum of $100.00 per year regardless of profit. A start-up restaurant, latte stand or second hand boutique pays $100.00 per year. Successful business consulting firms, law firms or insurance agencies can pay thousands. This taxing structure has been a significant factor in the loss of thirty thousand downtown jobs over the last decade and is the number one issue raised when the city and county are described as being “business unfriendly”. And because your “peddler’s license” will cost you from $60.00 to $300.00 per year, no more, in towns in Clackamas and Washington counties, firms which are not location dependent have left or are leaving
Last year Commissioner Adams put forward a proposal to increase the compensation deduction to $125,000.00. The proposal was co-sponsored by Commissioner Dan Saltzman. Adams proposal was extremely modest. It would have returned four million to the local economy over several years. It was tied to future revenue increases and was revenue neutral. It failed in a 3 — 2 vote due to opposition from Mayor Potter and Commissioners Sten and Leonard.
During testimony, Commissioner Sten stated “If we’re going to spend four million dollars to help small business,” he said, “I think we can do a better job ourselves through our own targeted programs”.
Under this system, a sole proprietor making the same exact salary as a city commissioner pays $1200.00 per year in city taxes that the commissioner does not, simply because they choose work for themselves.
As a city commissioner, I would provide the third vote for this needed initial reform and would continue to advocate for total reform of the Business License Fee. In order to be competitive we need to move away from income based taxing system to a true “license fee” system.