Starting next year, those with jobs in Salem may be paying the city a bigger portion of their paycheck.
Salem city councilors will decide on Monday, July 10, whether to create a new tax on wage earners to pay for police, fire and some homeless services. The council could decide to impose the tax, reject it or send it to city voters.
Salem Reporter talked with residents recently at the Salem Saturday Market about the proposal and collected their questions from conversations there and emails.
Who pays the tax?
Workers with jobs within Salem city limits, except those who make minimum wage, would pay the tax.
How much is the tax?
The proposed tax rate is 0.814% of all wages, which comes out to an average of $42.19 a month or $506.24 per year for someone who makes $29.90 an hour, which is the average wage for Salem workers.
People who make minimum wage of $14.20 an hour will not be taxed. Those who make anything above minimum wage will be taxed. Someone who makes $15 an hour full-time will be taxed an estimated $21.16 a month, or $253.97 per year.
The above estimates come from the city’s payroll tax calculator, which is available online.
How will the tax money be spent?
The tax is expected to bring in $27.9 million per year. City officials say that would pay for sustaining and expanding staffing and services at the police department, fire department, emergency and medical services, code enforcement and services for unsheltered people, including the navigation center and micro shelters.
The police department will get nearly half, at $10.5 million a year ,according to an April staff report. Of that, $7 million would go to sustain current operations, $1.5 million to fund and expand the homeless outreach team, and add an additional $2 million to hire 13 officers for a community policing program focused downtown. More on what that means here.
Homeless services, including the navigation center and three micro shelters, would get $7.9 million according to the staff report. Those programs are currently being funded with state grants and federal Covid relief money. The city otherwise does not have money in place to keep those services running beyond 2025. Read more here.
The fire department would get the next largest chunk at $6.5 million, according to the staff report. Of that, $4.2 million would go to maintain current services, and $2.3 million would pay for an additional 12 employees. Without additional funding, the department will not be able to operate two planned new fire stations to be built starting in 2028. More on that here.
When will the tax be voted on?
The Salem City Council will hold a public hearing on the payroll tax at its meeting on Monday, July 10.
Councilors will then vote on whether to impose the tax without sending it to Salem voters.
If councilors vote to impose the tax on Monday, there will be no public vote until 2031, after seven years of tax collection. If councilors don’t approve the ordinance, it would likely go to voters in November.
When will the tax take effect?
At the earliest, the tax would take effect July 1, 2024. If councilors decide to send the tax to Salem voters, it could take effect later, or not at all.
Why is the city doing this? What other options have they looked at to balance the budget?
City officials say they are facing a budget deficit because the cost of wages for city employees and supplies is rising faster than the city’s property tax revenue. City leaders are seeking a new tax to make up the difference.
In 2019, the city’s revenue task force recommended an increase to the operations fee and a new payroll tax to address the issue. The payroll tax was planned for a public vote in 2020, pulled from the ballot due to the pandemic.
Didn’t the city just raise operations fees?
Yes, the operations fee, which shows up on utility bills and goes to emergency services, libraries, parks and other services, went up on July 1.
How can I comment or weigh in on the tax proposal?
Monday’s city council meeting, which includes a public hearing on the topic, will start at 6 p.m. at the city council chambers, 555 Liberty St. S.E. Room 220. The meeting also will be broadcast online on Capital Community Media’s Youtube channel in English and with Spanish translation.
You can sign up at the meeting to comment during the hearing. You can also sign up in advance to comment remotely, or submit a written comment.
To comment remotely, sign up on the city website between 8 a.m. and 2 p.m. on Monday, July 10.
For written comments, email [email protected] before 5 p.m. on Monday, or on paper to the city recorder’s office at the Civic Center, 555 Liberty St. S.E., Room 225. Include a statement indicating the comment is for the public record.
Councilors can also be reached directly. Emails sent directly to councilors are not included as part of the public record unless specifically requested in the email.
Ward 2, Linda Nishioka, [email protected]
Ward 3, Trevor Phillips, [email protected]
Ward 4, Deanna Gwyn, [email protected]
Ward 5, Jose Gonzalez, [email protected]
Ward 6, Julie Hoy, [email protected]
Ward 7, Vanessa Nordyke, [email protected]
Ward 8, Micki Varney, [email protected]
A single-family homeowner will now pay a total of $14.43 a month for the fee, and multi-family homeowners will pay $11.54.
The extra money will go to add park rangers, code enforcement, downtown security and Salem Outreach and Livability Services team, which works with Salem’s homeless community to make service referrals and do sanitation work.
It was part one of the city’s two-part plan to address its revenue issues, part two being the proposed payroll tax. More on that decision here.
I make just above minimum wage. Will I have to pay the tax?
Yes. If you make Oregon’s minimum wage of $14.20 per hour, you’re exempt from the tax, but workers earning more than that would pay taxes on their full paycheck.
Are employers taxed?
Businesses and employers don’t pay any portion of the tax – the amount comes out of employee paychecks, though businesses will have to administer the tax.
I work remotely and live outside Salem, but my employer is based in Salem. Will I be taxed?
That depends. If you’re fully remote and never work inside city limits, you won’t be taxed.
If you ever work in Salem, you’ll pay taxes according to how often you work within city limits.
I work a hybrid schedule and am in Salem some days and outside the city other days. Will I be taxed?
Yes – but you’ll only owe taxes for the share of your work done in Salem.
For example, if you work at home in Independence three days per week and in a Salem office two days per week, you’d pay taxes on 40% of your paycheck – the portion earned in Salem.
If I live in Salem, do I have to pay taxes on retirement, Social Security, PERS or other pension income?
No. The tax is only on employment income.
I’m self-employed in Salem. Do I have to pay the tax?
Yes, self-employed workers will owe tax on their net earnings.
How will this affect state workers?
The state of Oregon is Salem’s largest employer, and state employees would account for a large share of those paying the tax. For those who don’t live in the city, it will be the first Salem tax they pay.
The state employs about 8,000 full-time workers in Salem who commute from outside the city, said Andrea Chiapella, Department of Administrative Services spokeswoman. Another 477 part-time state workers commute to Salem. Those numbers don’t include fully remote employees.
Clarification: The phrasing of the public voting timeline has been updated for clarity, and that emails directly to councilors should state the emails are for the public record, if desired.
Contact reporter Abbey McDonald: [email protected] or 503-704-0355.
Contact reporter Rachel Alexander: [email protected] or 503-575-1241.
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