Multnomah County reviews indexing, tax-credit options for Preschool for All amid revenue uncertainty

The Multnomah County Board of Commissioners on Aug. 5 held the first of two briefings on proposals to "index" the county—s Preschool for All (PFA) income tax and on two tax-credit ideas, hearing staff estimates of revenue impact, administrative caveats and an outside economist—s presentation on migration of high-income earners.

Multnomah County economist Jeff Renfro and Chief Financial Officer Eric Cariano summarized two main indexing options under consideration: (1) begin annual automatic inflation adjustments to the tax thresholds starting in a future tax year, and (2) a larger "rebase" approach that would first retroactively raise thresholds to account for inflation since the tax began in 2021 and then index going forward. Cariano told the board, "I really see this as if you were to push forward, potential indexing for Preschool for All, is that we don't do it in a in a middle of the tax year," stressing any change should take effect for a future tax year to allow for system, form and taxpayer communication work.

Why it matters: staff said modest per-filer benefits from indexing accumulate quickly across thousands of filers and would reduce annual PFA revenues. Jeff Renfro warned the county—s revenue mix is highly volatile because a small group of very high-income filers (with a large share of capital-gains income) contributes a disproportionate share of tax receipts; capital gains accounted for about 17% of taxable income in 2022 and about a third in 2021 for the county—s payer population. That volatility complicates matching PFA—s entitlements and seat commitments to an unpredictable revenue stream.

What staff presented - How indexing works: staff described two inflation measures under consideration: a regional CPI (CPI-W, West…