City of Portland/Multnomah county residents pay the highest income tax rates in the nation?
Did you know that the city of Portland and Multnomah County have the highest income taxes in the united states? If you’re a resident of this area, you’re probably used to paying more in taxes than your friends and family in other parts of the country. But do you know why? In this blog post, we will take a closer look at why the city of Portland and MultnomahPortland has the highest taxes in the United States!
Let’s examine the case.
Here we call him Alex, who owns a few different businesses and just sold one business interest for $471,072. His filing status was single.
Taxable Income in 2021: $569,645.
He was a resident of Multnomah county so the business interest sold was sourced from Multnomah county.
Oregon Metro Supportive Housing Service Tax:
In 2021, Oregon metro supportive housing service taxes requires the Portland metro residents to pay 1% on income more than $125K for a single/Married filing separately taxpayer or $200,000 for a married filing jointly taxpayer.
Here’s some resources:
Oregon MSHS Tax: https://www.oregonmetro.gov/how-metro-works/finances-and-funding/income-tax-information
Oregon Metro Boundary Map: https://gis.oregonmetro.gov/metro-boundary-lookup/?_ga=2.264229769.4050046.1641830563-641815136.1601996475#/batch-address-query
The map above shows you whether your resident is within the Oregon metro map. Currently, you are safe if you live in Newberg or west or east of Wilsonville. You would be in the metro area if you are in Sherwood or Hillsboro.
Portland Preschool For All Taxes:
In 2021, on top of Oregon MSHS, we started having Portland For All income taxes for Multnomah County Tax Residents. This is a similar form to Oregon MSHS with a slightly worse tax rate and tax tiers. 1.5% on income more than $125,000 for a single/Married filing separately taxpayer or $200,000 for a married filing jointly taxpayer. An additional 1.5% was assessed on income more than $250,000 for a single and $400,000 for a married filing jointly.
Here’s some resources for Portland Preschool for All taxes:
In Alex’s example above, he ended up paying about $16K combining these new taxes and total income taxes of $182K (federal, Oregon, Oregon MSHS, Portland PFA, Oregon TriMet). TaxFoundation website shows New York is the highest income tax state (because of New York City local tax jurisdiction) with 15.9%. However, in Alex’s tax bracket, if he was a New York City resident, it would be 10% tax rate. Alex’s Oregon effective tax rate is just about 12.5%.
This is the differentiator compared to other states.
Tax foundation website shows 2021 and 2022 tax rate, which seems to omit some local tax updates in 2021, particularly in Multnomah county in Oregon.
https://taxfoundation.org/publications/state-local-tax-burden-rankings
Oregon’s tax rate shows 10.8% as the highest, which is no longer correct.
What if the income is higher？
Here’s another case with $5M taxable income:
It’s almost the same tax bracket but Oregon puts slightly higher.
This is largely due to the progressive tax system that New York with 10 different tax brackets with income ranging from 0% at $0 to 10.9% at $25M and up. Oregon has only three brackets and the highest 9.9% starts from 125,000 or more. Once you are over $9,200, you reach the marginal tax rate at 8.75% rather easily in Oregon. In New York, you’d be taxed at 4.5% with $9,200.
Oregon SHS and Portland PFA are the two local taxes. If you are in Portland resident, chances are you’d have to file both returns and pay two of these newer local income taxes on top of your state income taxes, which puts you high income tax rate compared to others in different parts of the United States.
In conclusion:
Portland is arguably imposing residents the highest income tax rates in the nation.
Domicile planning is important for business owners. Many service business that does not require physical presence within Multnomah county will move away from the county. Planning for business sales well in advance of receiving an LOI from the prospective buyer creates a return on your investment. Consider your domicile before you start your next venture. Also, we provide advanced tax strategies for high-income earners and operating business owners in a peak-performance stage. Do not hesitate to reach us.
