Dave Lister points out campaign violations of City Council

Superb Guest Column in The Oregonian
February 04
By Dave Lister

When I ran in the 2006 primary for a Portland City Council seat, I recruited one paid campaign worker. After we negotiated the terms and rate of his compensation, I dutifully had my accountant set up federal and state employer ID numbers so I could make the proper tax withholdings from his paychecks. I did this despite the advice of many that I pay him as a contractor. The reason was simple. To pay him as a contractor would have been illegal. Unfortunately, many campaigns and candidates make the choice, either through ignorance or indifference, to pay their staffers illegally. They also get away with it.

The IRS test for paying an employee as a contractor is not only stringent, but clear. If an employee is a contractor, you can tell him or her what to do, but not how to do it. You can’t tell him when to come and go. He must provide his own work space and tools. He must provide similar services to other clients. In effect, he works for you when he chooses to and then bills you for it.

A case in point is Portland Mayor Sam Adams’ last campaign. An examination of his campaign expenditure reports shows that he paid Jennifer Yocom, who managed his slash-and-burn campaign against Sho Dozono and was subsequently rewarded with a cushy job on his mayoral staff as “arts and culture director,” about $30,000. The records also show that his campaign paid nothing to the IRS and nothing to the Oregon Department of Revenue. Ergo, Yocom was paid as a contractor, as were all of Adams’ campaign workers. And I seriously doubt that any of them met the IRS test as independent contractors.

Running a legal payroll for a campaign is a lot of extra work and a lot of extra expense. Money that could otherwise be used to promote your message has to go to Social Security, Medicare, state unemployment, federal unemployment, Workers Compensation and TriMet. And as any businessperson knows, the record-keeping is time consuming, and making the proper filings is laborious.

When I watched the city races in 2008, the split between the candidates making the proper filings and those who did not was about 50-50. Amanda Fritz, who was scrupulous with her use of public campaign finance funds, made all the proper withholdings and filings. Other publicly financed candidates handed out five-figure lump-sum payments like candy to friends they’d recruited for their campaigns, with no withholdings whatsoever.

Oregonians just approved two tax measures that they believe will make our state’s tax structure more fair. Many, if not most, of the candidates that will be running in the local primaries supported these measures. Isn’t it also only fair that they conform to the rules and pay their campaign staffers legally, with all the proper withholdings and tax filings?

Nearly all the electable candidates in the greater Portland area are big supporters of mass transit. Is it appropriate that they evade paying TriMet’s payroll tax by improperly defining their workers as contractors? Statewide, all the candidates claim to have great concern for people out of work and our high unemployment rate. Is it appropriate that they evade paying state and federal unemployment taxes by paying their employees as contractors? I don’t think so.

I’d like you to join me this election cycle in carefully watching the candidates’ expenditure reports. If they’re making payments to staffers and not to Oregon and the IRS, then they’re breaking the rules. And if they’re breaking the rules, do we really want them representing us on public policy matters?

Dave Lister is a small-business owner who served on Portland’s Small Business Advisory
Council.