If you know me, you know that one of my pet interests is tax policy. It’s not the sexiest part of urban planning, but the ways in which local governments are funded and pay for services is of strong interest to me. I want to live in a place where we have a fair and just taxation system¹, and I want our governments to provide quality services. So imagine my distaste when I found out that our state government is seeking to kill a marginal income tax on top earners that funds Preschool For All (PSFA) in Multnomah County².

Stop Means Testing

In a WW article³, Senator Taylor (D – Senate District 21. That’s my district by the way!) is quoted as saying “I personally will admit my bias; I like things that are means-tested”. This is one of the essential cruxes by which this political fight is playing out. The state provides preschool services for low-income families (Taylor also says: “Is it a good idea to have what is more or less the same program?”), and so is seeking to prevent counties in Oregon with a population of 700,000 or more from providing preschool services that “not in alignment … with the standards and criteria required of state [programs]”⁴.

Of course, I find this kind of language limiting a state measure to just one geographical region to be stupid on their face (more on that later), but the real issue on the surface is that the state feels that we should only pay for low income families to have access to preschool. This is stupid.

There is a huge amount of research into the positive impacts of preschool education across the board⁵. Having a public education system which supports preschool for all means improving educational outcomes across the board – something Oregon has been consistently critiqued for not doing⁶. The current state programs are based on eligibility for other benefits (OHP, EBT, etc.) or a 200% of the federal poverty line income level. These are extremely harsh limits, with only about 18% of families in Multnomah County⁷ earning little enough to qualify for the three-person household OHP Bridge program (205% of the Federal poverty line).

That three-person household limit is just $53,300, and it’s trivial to imagine a family where both parents work and still struggle to support a kid – two parents working full-time for minimum wage in Multnomah County earn $66,352 annually⁸! And trust me, it’s not easy to make do in this county earning that little, as that’s about what Olivia and I made combined in 2024⁹. We’re doing just fine, and I have good job prospects at the moment, but we would struggle immensely to support a child. For our hypothetical family, where both parents work their ass off in potentially menial jobs to support their kid, they would likely pay some $1,600 for a two-bed apartment¹⁰. This is just short of the rent burden benchmark of 30% of gross income for their income ($1,658), but factoring in utilities definitely pushes them over. Adding on the average $26,334 yearly it costs to raise a kid¹¹ in Oregon, and you have a recipe for a family who is struggling by basically any metric – except the one that the State of Oregon uses to determine eligibility for free preschool.

Even if you support means testing in general, it’s hard to take a look at our current system of overlapping welfare cliffs and good about it. We leave so many people who need help behind, and one of the most important facets of the Preschool For All programming is the for all part. No eligibility hoops to jump through, no worries about if you can a promotion and still put your kid in preschool. Sure, some people who could afford preschool anyways can now take advantage of the service as well – but this is a good thing. Not only is it more fair, as high earners directly fund the program, but it also reduces the psychological burden on poor families who rightly or wrongly feel ashamed to take on welfare services¹².

If the state wants to actually justify ending this tax, they should have more data, discussion, and consideration about the realities of poverty in Oregon – not just an offhand remark from one state senator saying that they prefer means testing.

About That Tax Flight Stuff

Amidst all these welfare state and means testing considerations is Governor Kotek’s relatively public beef with Multnomah County Char Jessica Vega Pederson¹³. Kotek has publicly claimed time and time again that the fact that Multnomah County high-earners shoulder the second highest tax rate in the country at 13.6%¹⁴ – but this misses the forest for the trees.

For starters, when considering tax burdens we should always think locally. Tax flight from Multnomah County is most likely to Washington, Clackamas, or Clark – since most people can reasonably work the same job regardless of where they live in the metro area. From the state’s perspective, it really shouldn’t matter if a high earner prefers Washington to Multnomah County for tax reasons, so we’ll start by considering on the total tax burden difference between Clark County and Multnomah County, and how the PSFA tax has affected that.

You’ll notice that I’m talking about total tax burden here, rather than just income taxes. This is a critical point which is basically never addressed in breathy pieces from the WW or Oregonian, but since Oregon wisely chose to systematically cripple their property tax receipts in the 1990s¹⁵, it’s natural that other modes of taxation would pick up the slack. Lacking a broad-based sales tax, income tax measures are the only real option¹⁶. Even though Clark County has property tax numbers which aren’t far off from Multnomah County in absolute terms, factoring in property value and rich owners in Multnomah County come out significantly ahead – especially in systematically undervalued neighborhoods.

For a ~$1M house in close-in neighborhoods of Vancouver, property taxes are $9k to $10k¹⁷. In Portland? You can find a $1M house that’s assessed as if it’s a $250k house, and thus pays some $5k in property taxes¹⁸. That’s +$5k for living in Portland, though of course there are location-specific oddities thanks to our entirely unfair property taxation system¹⁹. On sales taxes, Vancouver charges an 8.8% rate, and a typical household spends something like $30k a year²⁰ on taxable purchases (food, entertainment, etc.) – that’s another $2,500 in favor of living in Portland²¹. Our hypothetical family that can afford a $1M home (~$6,000/month in housing costs) earns about $250k/year, and thus pays $22k in state and local income taxes²², 91% of which goes to the state, for a total of $14,500 in savings for a high-earning family living in Clark County.

So yes, Clark County has a lower household tax burden than Multnomah County, and PSFA contributes to that. But only very marginally – just $2,000 or so for a family earning $250k. That’s about the same amount that Clark County charges a typically spending family on sales tax. If a family wants to move to Clark County for tax savings, the incentives already are there and the effect is still relatively small. In the 2023 Portland Metro Chamber report²³ about the state of the regional economy, they make a big hoopla about total earnings leaving Oregon in favor of Clark County, but also show figures that peg the net number of households leaving at about 1,750 per year (550 of which are $100k+ earners) – that’s about 0.2% of households in the Oregon tri-county area.

It’s possible that at the highest end of the income scale, the PSFA tax caused a mild acceleration of this process, but it would be hard to look at the state of the regional economy and conclude that this one tax is attributable to an appreciable amount of economic woes. And given that the most recent tax receipt data for PSFA filings does not show much in the way of flight – indeed there was a 15% increase in filings from 2021 to 2023²⁴ – it’s hard to conclude that this is an appreciable issue that the state should be intervening in.

State Overreach is Bad Here, and it’s Bad in General

Part of the distaste I have for this move is the arbitrary stripping of local government powers. Targeting counties with a population of 700,000 or more is bad politics (though it would be hilarious if this caused a city-county consolidation for Portland, population: 650,000, that left the PSFA tax untouched²⁵) if only because it leaves the door open for random stripping of powers of other counties in the future. Washington County is growing fast, and is projected to pass that figure sometime before 2040²⁶. What happens if they want to fund a preschool for all program in the interim?

Additionally, while it’s easy to imagine situations where state overreach is necessary, such as protecting LGBTQ folks from discrimination or harassment in less progressive parts of the state, are the state standards relating to eligibility for preschool programs really one of those cases? Given the issues with means testing already explored here, I think it’s clear what my answer to that is. Our current state standards for providing services are too high, subject to too many welfare cliffs, and are generally not grounded in some moral prerogative.

Being generous to the idea, means testing is implemented because we don’t have enough money to support everyone who may want a program, and we want to ensure that we prioritize people with the highest need. From this vantage point, purposefully cutting voter-approved funding that specifically addresses this is outlandish. It’s the state telling Multnomah County that “we don’t want to have enough money to provide preschool for all, so you can’t do it either, sorry!”. Is that a progressive value? Will Governor Kotek stake her re-election on being anti-education? Probably not, but this is a clear example of abusing state power for no good reason.

In the broader scheme of things, when the state intervenes on local policy, there needs to be a clearly stated moral justification. Reading between the lines, Governor Kotek’s justification here is “high earners are leaving Oregon as a direct result of this tax, and that imperils our ability to provide services at the state level”. There is a moral justification in there, but it’s poorly articulated and almost certainly exaggerated. If the concern is this dire, why not commission the Department of Revenue to track specific trends on high-income earners to see the total movement within Oregon, and cross reference Census trends within the bi-state MSA? The state unambiguously has the actual data on where high income earners live, and could produce an interesting and nuanced report about trends in the region. Then, we could have a legitimately enlightening conversation about how tax burdens are distributed and the relative fairness of our system.

Instead, the crux of Governor Kotek’s anti-PSFA stance²⁷ revolves around trends extrapolated from the 2021 tax year – where Covid-related work trends caused significant out-migration from urban areas as the commute pressures grounding people in urban areas were (temporarily) decreased. This, alongside high capital gains in that tax year (associated with selling major assets – like a home) is ultimately why PSFA is in the situation it is. It made way more money than expected thanks to the pandemic, and pandemic era macro trends made it an easy boogeyman for the wealthy who just want an excuse to pay lower taxes. It should be clear that is not a strong moral prerogative in reality, even if there is some stated potential justification.

Putting it All Together

It’s clear from more than just this case that the wealthy have a lot of influence in the machinations of the Oregon Democratic Party. Looking at the list of names in the Downtown Portland Task Force²⁸, and you’ll find the gamut of corporate lawyers, downtown developers, and a slew of CBO leaders, but just one small business owner and zero organized labor reps. Though Kotek’s gubernatorial campaign supporters were more in the lines of the traditional Democratic party (with significant union support²⁹), I have a hard time seeing this reflected directly in the major outcomes of her governorship.

This isn’t to say there’s some grand conspiracy between the mega-rich and Governor Kotek, just that both her and the Oregon Democractic Party writ large seem to be more sensitive to the needs of wealthy Portland area residents than they are to the working class. Maybe that’s an inevitable result of a political system which depends heavily on wealthy donors, but it’s still immensely disappointing. The Oregon Democratic Party has a supermajority in the legislature and is more concerned that the traditional 0.2% of net household migration from Oregon to Clark County might have increased to 0.3% than they are about the 70% to 85% of families who would become ineligible for free preschool in Multnomah County.

I’m not sure I could imagine a better example of the moral bankruptcy of the modern Democratic Party than this. As long as we keep cutting off our nose to save our face, we will fail to garner the mass support that genuinely progressive economic policy has. Oregon can do better than this, and you should write to Governor Kotek and your state senators to let them know.

Footnotes

1. Incidentally, there’s a lot of issues with Oregon’s taxation system, but I’ve got a planned post about everything you ever wanted to know about Oregon’s property tax system, but were too afraid to ask where I plan on getting into that more. ↩︎
2. You can read the WW article here, and if you also hate this, you can write a letter to Governor Kotek about it here. ↩︎
3. See footnote 2 ↩︎
4. See footnote 2 ↩︎
5. Here’s a page with links to a lot of that research ↩︎
6. Seriously, the WW reports on this like every week. But they also consistently drum up anti-PSFA sentiment. I guess we should just sort of vaguely want better outcomes without paying for them. ↩︎
7. Data sourced from here (income) and here (income limits). For larger families, the income limits are slightly less harsh but only slightly. For families of 5, just 31% of families earn little enough to qualify for the programs. ↩︎
8. To make matters worse, they would not qualify for a 60% AMI affordable apartment – that has an income limit of $63k for a three person household – so would be stuck paying the absurd $2,124 rate for 80% AMI limit for a three person household (source). ↩︎
9. While I was working part-time ($21/hour) and she was working full time, we earned too much to qualify for EBT (two person household income limit is $42k) ↩︎
10. Sourced from this site. The fact that an “affordable” 2 bed is like 30% more expensive than the average 2 bed rent (see footnote 8) in Portland is sort of ridiculous when you think about it for one second. And it doesn’t get less ridiculous the more you think about it. ↩︎
11. Soured from this site. Even if our hypothetical family can economize down from this, it’s probably more expensive to raise a kid in Portland than elsewhere in the state. ↩︎
12. Study after study shows that this stigma is a barrier to use of public assistance programs. ↩︎
13. I won’t go to bat for JVP, but she is right to push back against the governor about the issues of tax flight with respect to PSFA. ↩︎
14. See this article ↩︎
15. I’m being sarcastic if that isn’t clear – here’s a good visualization of one reason why this is bad from the Big O. ↩︎
16. PCEF provides an interesting counter example by being almost a broad-based sales tax, but one that consumers can avoid with ease (by shopping at small retailers). This factor alone makes the tax incidence (who pays) less likely to be consumers, as large retailers still have to compete on price with small ones (so the specifics of the given market in question probably determine the tax incidence). ↩︎
17. Here’s an example of one. ↩︎
18. This is especially true in the core of Historic Albina, where property values were very low in the early 1990s but are extremely high now. (Example) ↩︎
19. This means that between different parts of Portland there can be 4x variations in property tax receipts. But we are assuming a crafty consumer who knows about this wonkery and makes decisions along these lines. It’s also worth saying that essentially any heuristic about property values would conclude that Portland has more valuable property than Vancouver – so the savings here make even less sense than they would in a vacuum. ↩︎
20. Sourced from the BLS ↩︎
21. In reality, some purchases could be made in Portland rather than in sales tax heavy Vancouver, but I think the $20k spending a year is low-balling a $250k earning family in the first place, and not all purchases can be shifted away from Vancouver anyways. ↩︎
22. Sourced from here ↩︎
23. Available here ↩︎
24. See footnote 14 ↩︎
25. I think a city-county consolidation is an interesting idea worth a serious study, but this is mostly a throwaway comment since Portland happens to have less than 700,000 residents ↩︎
26. The population research center at PSU does this work on behalf of the state, and it’s pretty interesting. Check it out here. ↩︎
27. As articulated in this letter (from the article in footnote 14) ↩︎
28. Sourced from here ↩︎
29. Sourced from here ↩︎