A payroll tax is levied as a percent of gross payroll earned within the taxing jurisdiction. Entities can enact a payroll tax on employees and/or on employers.
See the chart below to estimate how much you will contribute each month. A business owner will not be taxed twice (as both an employee and the employer).
* As of July 1, 2020, the minimum wage in Eugene will be $12 per hour.
**An employer with two employees or less would receive a reduced rate of .0015 on the first $100,000 of payroll.
The revenue team recognized that the payroll tax doesn’t impact every segment of the population. It will not capture revenue from visitors, city residents employed elsewhere, retirees and the unemployed. The revenue team, however, thought that this approach was the most clear and fair of the final options considered.
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The Community Safety System works to keep everyone safe. This system is made up of interdependent City departments and community partners. Each relies on the other in different situations.
Right now, the Community Safety System is stressed:
In 2018, the City Council dedicated $8.6 million starting January 2019 for 18-months of funding to increase staff and resources. The goal is to stabilize prevention, homeless services, public safety and emergency response. The bridge strategy funding expires on June 30, 2020.
Council also committed to finding a long-term solution to this problem. A Revenue Team of community members and Councilors was established in November 2018. After reviewing funding options, the team recommended a payroll tax to support $23.6 million in community safety services on an annual basis.
At their June 10 work session, the Eugene City Council passed a community safety payroll tax ordinance that will provide on-going funding for critical services including police, fire and emergency medical services, municipal court, homeless services, and prevention services.
A Community Safety Revenue Team was formed to develop a funding recommendation for the City Manager. The Revenue Team included three City Councilors, current and former Budget Committee members, and the Chair of the Police Commission. The revenue team studied many different types of funding options, ranging from levies to a combination of other taxes or fees. You can see the list and analysis of all revenue alternatives considered in the Revenue Team’s Final Report. Also see key discussion points from the Revenue Team’s recent analysis of two specific alternative funding options: River Road/Santa Clara Annexation and a City personal income tax.
The team took into consideration the amount of money needed, the administrative effort and potential costs, and the stability and reliability of the funds. They also considered the fairness of the different options, their feasibility within Eugene and how the option related to the community safety need. The team also reviewed the potential economic, environmental, and social equity impacts – also known as the triple bottom line. They focused on a payroll tax as they concluded their research.
In the long term, gross payroll appears to be a sustainable and growing revenue source that can weather economic cycles and keep pace with general and wage inflation impacts on recommended service funding levels.
Payroll taxes are taxes paid by employees and/or employers and are usually calculated as a percentage of gross payroll or wages. For employees, the tax is percentage of an employee’s total taxable wages. For an employer, the tax is usually a percentage of an employer’s total gross payroll.
The measure passed by Council includes critical accountability requirements to ensure the funding is used as directed including:
To ensure accountability for the expenditure of Community Safety payroll tax, the City Manager will convene a Community Safety Citizen Advisory Board. That group will review the use of payroll tax funds and report on the City’s use of the tax revenue each year. In addition, after seven years the board will conduct a comprehensive review of the City’s community safety system, use of the payroll tax revenues, and compliance with the ordinance. All reports will be provided to the City Council and public.
The Community Safety payroll tax will not begin until after June 2020. The panel has not been selected yet but will be in place prior to the payroll tax going into effect.
Eugene’s community safety services are currently funded by the one-time bridge funding that Council approved for January 2019 through June 2020. The payroll tax is intended to provide a long-term funding solution from July 2020 moving forward. Per the Payroll Tax Ordinance, no tax shall be owed on wages earned prior to July 1, 2020.
The Community Safety payroll tax will not begin until after June 2020.
The first step will be to write the administrative rules that will provide the more detailed instructions for how the tax will be administered and collected. City staff will be working with the administrative agency that will collect the tax to draft those rules.
Once the rules are drafted there will also be a public comment period for people and businesses to provide feedback. These comments will help inform any further revisions to the rules that will be considered by the City Manager. The rules will be finalized several months before the payroll tax goes into effect.
Join an email list to get updates on the administrative rules.
Yes, all employees earning wages and salaries within the City of Eugene would pay the employee portion of the payroll tax – including public employees.
Public employers would be exempt from the proposed payroll tax because intergovernmental taxation is prohibited. Without express authority, one government entity cannot tax another.
The key factor for determining who will contribute to the Community Safety payroll tax is the physical location of a business. Where the employee lives or where the corporate headquarters are located does not affect eligibility. If the physical location of a business falls within Eugene city limits, then the employer and employee payroll taxes would apply. For businesses with multiple physical locations both in and out of Eugene, the payroll taxes would only apply to the locations within city limits and the employees who work there.
The total needed for longer-term system stability is approximately $23.6 million per year, which includes the $8.6 million bridge.
The City uses a variety of funding sources to fund community safety services including our General Fund (which mostly comes from property taxes), grants, federal funds, local fees and taxes (like the marijuana tax), and other sources. About 60% of the City’s general fund goes toward public safety. You can see more information on the City’s Open Budget website.
Funding from the local marijuana tax does support community safety. The local marijuana tax collected almost $1 million in 2018; that money supports parks security, Community Court, human services, and a portion has been set aside to fund homeless shelter options. Funding for a local option levy was also considered by the Community Safety Revenue Team, but a new levy would yield less than $10 million annually and isn’t considered a permanent funding source as a levy would need to be renewed every five years. These other options do not meet the funding needed to provide services for our Community Safety System as approximately $23.6 million is needed each year.
The State of Oregon collects a 0.1% employee payroll tax for transportation funding. The revenue funds statewide transportation initiatives including capital projects and infrastructure maintenance. Employers collect the tax on behalf of employees and submit to the Oregon Department of Revenue (DOR).
Additionally, two special transit districts collect payroll taxes from employers. The revenue partially funds mass transit in the Lane Transit District (LTD, Eugene/Springfield area) and the Tri-County Metropolitan Transit District (TriMet, Portland area). The 2019 rates were 0.74% and 0.7637%, respectively. Employers submit the funds to the DOR. Nonprofit 501(c)3 organizations are exempt from this tax.
The majority of city funds (78.3%) come from user fees and property taxes, which are primarily paid by city residents. There are some taxes that come from other sources to help provide the services used by residents, visitors, and others who spend time in Eugene. The local transient room tax, for example, is paid by people who visit Eugene and stay in a local hotel or similar accommodation. The local gas tax is paid by people who stop for gas in Eugene. While the people paying those taxes do not live or vote in Eugene, they do take part in the services provided by the city, including use of local roads, public safety and emergency services, and the cultural events and programs held in Eugene. Likewise, when Eugene residents travel or work outside of the city, they also contribute to local taxes in other communities.