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20,000 people have yet to pay Portland-area taxes meant to combat homelessness and pay for preschool

Taxpayers felt blindsided after receiving a letter claiming they failed to pay. They didn’t know their bill was overdue because nobody told them when or how to pay.

PORTLAND, Ore. — Cyndi Turner is a stickler for accuracy. She's an accountant, which helps explain why the Tigard woman was so disheartened after receiving a stern letter from the City of Portland claiming that she failed to pay some taxes.

“I pay my taxes in full,” said Turner. “I pay them on time.”

The letter explained that the City of Portland was collecting on behalf of Metro, the governing body that covers some services in much of the tri-county area. High-income households in Washington, Multnomah and Clackamas counties were expected to pay a new tax to fund homeless services.

Turner recalled that she had voted in support of the homeless services tax but had no idea the bill was overdue. Nobody told her when or how to pay.

“I do my taxes on TurboTax and TurboTax didn’t mention anything about a local tax for this,” said Turner.

To make matters worse, Turner explained, the City of Portland threatened to tack on penalties and interest for the unpaid bill.

“It’s just frustrating because I feel like there should have been a little more communication and a little bit more understanding the first time out that really taxpayers had no idea that this was happening,” said Turner.

RELATED: Fact-checking the claim that Portland Metro homeless tax was 'over-collected'

Did you get the memo?

Portland’s Bureau of Revenue and Financial Services is mailing roughly 20,000 letters to high-income households warning they didn’t pay Metro’s homeless services tax or Multnomah County’s separate “preschool-for-all" tax, which voters overwhelmingly approved in 2020.

12,000 letters went out in the first batch several weeks ago. An additional 8,000 letters are to be sent out over the next few weeks, explained both Metro and Multnomah County spokespeople.

Both taxes target individuals who made more than $125,000 annually or couples who bring in more than $200,000 dollars combined.

Metro collects 1% tax on income over those thresholds for the homeless services tax. Multnomah County adds a tax of 1.5% over that threshold. The tax rate bumps up to 3% for all income above $400,000.

Both Metro and Multnomah County said they tried to alert taxpayers by reaching out to employers, accountants and tax preparation firms but clearly not everybody got the message.

“I think there’s always an element where you hope you could do more,” said Eric Arellano, Multnomah County’s chief financial officer. “We contemplated sending out communication to all residents in Multnomah County but didn’t want to create confusion for those that did not owe the tax.”

Arellano identified two issues that impacted collection of the new taxes: payroll withholding and tax preparation software.

Starting in January of 2022, Multnomah County and Metro employers were required to withhold the taxes through payroll deductions for high earning employees. The withholding process wasn’t mandatory in the first year of collection. It’s unclear how many employers have set up withholding programs or alerted their employees who might owe the tax.

Additionally, popular tax preparation software including TurboTax and H&R Block don’t warn taxpayers who are likely to owe.

“We’ve made multiple efforts to reach out to TurboTax and H&R Block,” said Nick Christensen, Metro spokesperson. “They get to decide what they include in their software. We can’t compel them to say, ‘thou shalt include the Metro tax in your software.'”

So far, Metro said it has collected $202 million in taxes for homeless services, while Multnomah County said it has taken in $241 million for preschool-for-all.

Both Metro and Multnomah County explained it’s too early to accurately calculate a compliance rate, but early data suggests roughly 33% of those eligible have yet to pay Metro’s homeless tax.

'A lot of leniency'

To date, Metro said roughly $3.2 million in penalties have been assessed to those who did not comply with the new tax. The median penalty is $135.

Multnomah County has imposed $3.4 million in penalties for the 2021 tax year.

Metro’s spokesperson explained taxpayers can request the City of Portland waive penalties. So far, more than 2,800 penalties have been forgiven, said Christensen.

“Every time somebody has requested a penalty waiver from the City of Portland it has been issued,” said Christensen. “There’s a lot of leniency being issued at this point.”

Taxpayer Rex Lindaman argues it is unfair to forgive late fines for some households but not others.

“I just think to be equitable they just need to go back and give everybody that money back,” said Lindaman. He believes Metro did a lousy job notifying people the tax was due, so the government should waive all penalties.

“If they’re waiting for people to ask for the penalty to be refunded to them, I think that is shameful. It’s not fair to the other taxpayers at all,” said Lindaman.

Unlike penalties, the city is not waiving interest for delinquent households.

“We need some mechanism to make sure that those individuals do pay their taxes,” said Arellano. “If you waive interest and penalties, your ability to fully collect on those taxes becomes almost impossible because there’s no incentive to pay.”

So far, Multnomah County has imposed $1.4 million in interest for the 2021 tax year, while Metro has assessed $1.2 million in interest. The median interest charge for those who paid is $47, according to Metro.

The City of Portland, which administers both taxes, referred all questions to Metro and Multnomah County.

Portland was selected to collect the taxes because it already handles similar taxes beyond city limits, such as the Multnomah County business income tax. The Oregon Department of Revenue declined to collect the tax on behalf of Metro, according to Christensen.

Metro and Multnomah County explained it is difficult to predict income tax liability in advance because earnings can vary from year to year. The city of Portland reached a data sharing agreement with the Oregon Department of Revenue in December 2021.

Portland received the first data in September 2022, allowing it to see which individuals or households might fall into that "high earning" category which qualifies for the new Metro and Multnomah County taxes. According to Metro, the state data helped the City of Portland develop its mailing list for those 20,000 letters demanding payment on unpaid tax bills — along with penalty and interest.

“I just don’t think government should operate that way,” said Turner. “If government is trying to be transparent and they want us to support their services and want us to support their taxes, their bonds, all of that — they need to recognize their part in how it impacts us as a taxpayer.”

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