Tax compression: A “loss” it’s not

The Albany City Council plans to raise the city electric 'privilege" tax to 7 percent, up from 5 percent.

The Albany City Council plans to raise the city electric 'privilege" tax to 7 percent, up from 5 percent.

There's a chart in the July 8 agenda packet of the Albany City Council that reflects a mistaken view -- and may leave a wrong impression -- of an important fact about Oregon property taxes. "Property Tax Lost to Compression," the chart is titled.

It refers to the amounts by which individual property tax bills are reduced or "compressed" under Measure 5, enacted by the voters in 1990. The alleged loss amounted to about $200,000 in 2010 and rose every year until hitting about $1.3 million in 2014.

These sums are not "lost" at all. They were retained by Albany property owners because if the owners had been forced to pay the money, the tax rate limits of Measure 5 would have been exceeded, and that the constitution does not allow.

The limits are on the aggregate tax rates for operations of schools and community colleges ($5 per thousand dollars of market value) and on operations for all other governments including cities, counties and special districts ($10 per thousand).

Voters imposed these limits 25 years ago because property taxes were out of control and threatening to force some people out of their homes. Since then, voters in local jurisdictions have been persuaded to approve many local-option tax levies outside the tax rates that were set by Measures 47 and 50 in 1997 and '98. Levies were piled on top of levies as though the M5 limits did not exist. But they do exist, and they protect homeowners and other property owners from increases that would make the ad valorem tax even more burdensome than it is.

The chart makes it seem as though the city was entitled to that money and somehow was deprived of it. Instead, those figures represent sums the city hoped to receive but was not entitled to collect because of the taxpayer protections that still exist.

The chart is part of a staff report justifying council action to raise the city tax on electricity from 5 percent to 7 percent. This will raise additional revenue of more than $900,000 a year. And it is another example of obfuscating terminology. The city calls this a "privilege tax." What privilege? Electric service has not been a privilege for about 100 years.

In theory, the power company pays the tax for the right to have poles and wires on public property. In truth it's a direct tax on people, a tax on the privilege of living or being in business within the city limits. (hh)

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