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SIP won't provide enough revenue

Back in the day when a new major industry came to town, it paid its full share of property taxes. This money was needed to fund the expanded roads, schools and other government services required by the increased population that came along with the new jobs. It still is.

Today, we have a new model, the Strategic Investment Program (SIP), in which we give enormous tax breaks to attract new industry. The theory is that the influx of higher paying jobs will provide the government with more taxes, enough to accommodate the associated growth. This is a variation on the famous trickle-down theory of taxation: by giving wealthy people and big business tax breaks, they will invest that money and grow the economy.

In his January “State of the City” address, Hillsboro Mayor Jerry Willey proudly cited a large number of growth developments in Hillsboro, especially in new businesses and housing developments. This is all true and good. But what about the theory that government will get enough new tax money from the increased and higher paid population to provide for the growth of services needed?

If the theory is true, Hillsboro and surrounding Washington County, as the “economic engine” of the state, should also be a “tax engine,” collecting taxes far above the rest of the state due to our many high paying jobs. Unfortunately, however, it turns out that the theory is not correct.

The most telling evidence of the failure can be seen in the extent to which the state has to subsidize school property taxes in the Hillsboro School District. The level of state subsidy for each student depends on the amount of local property taxes collected. Because of equal state funding per “weighted” student, districts with high local property tax collections don’t need as much state money and require smaller subsidies.

If Hillsboro were a “tax engine” for the state, it would require a much smaller than average subsidy per student. In fact, calculations from Oregon Department of Education data show that Hillsboro’s per weighted student subsidy, $4,730, is almost exactly the state average of $4,759.

The city of Portland has lots of business and industry, but hardly participates in the SIP. What is the Portland School District’s subsidy per weighted student? Only $3,444.

As Hillsboro is only average in collecting its school taxes, it is also average on all the other property taxes we need for our services. But average isn’t good enough for a growing town with far above average infrastructure development needs. The Gain Share and Community Grant money Hillsboro receives hardly makes a dent in the lost revenue.

While this analysis applies to property taxes, the situation is the same or even worse with income taxes. The SIP is used only locally, but statewide legislative changes in business income tax rules have resulted in some of the largest companies — such as Intel — likely paying no income taxes at all.

In the end, we are swimming in a sea of new jobs and business development due to our tax breaks, but government revenue is trickling in by comparison. We have cut business taxes too much.

This mismatch between economic growth and the ability to support it with adequate infrastructure is a serious problem for Hillsboro. We need to find a better balance between encouraging business growth with tax cuts and collecting enough tax revenue from business to support that growth. The alternative is higher taxes for the rest of us.

Walt Hellman is a retired Hillsboro High School physics teacher and longtime member of Hillsboro’s Planning & Zoning Hearings Board. He can be reached at hellmanw@gmail.com.


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