House Bill 5 could cost Salem money


Staff Writer

SALEM – State Rep. Nick Barborak, D-Lisbon, urged city officials to let their feelings be known about a proposed income tax centralization bill that one city official said could cost the city an estimated $300,000 per year in tax receipts.

Barborak attended the Finance Committee of city council meeting Monday night at the invitation of Council President Mickey Cope Weaver. One of the topics on the agenda was House Bill 5, a topic that’s been discussed in previous meetings of both the Finance Committee and City Council.

As it stands now, city Income Tax Administrator Fred Pamer said the bill would take away local control of the income tax and give it to the state. The city relies heavily on the city’s 1 percent income tax receipts to pay for city operations.

Pamer said other cities are passing resolutions against H.B. 5 and gave the committee samples of resolutions from other cities. He said one key component that would hurt the city is a section dealing with net operating loss carry forward, which would allow a business to carry a loss over more than one year. The city does not allow it and the provision is calling for a net operating loss carry forward of five years.

Pamer estimated that alone would cost the city $250,000 to $300,000 per year in tax receipts.

City Auditor Betty Brothers said another change could also cost the city income, with the proposal lengthening the amount of time an out-of-towner can work in the city without having income taxes withheld. The current rule is 12 days and if a worker goes longer than that, the withholding begins from day one. The proposal extends the time period to 20 days and withholding would not begin until the 21st day.

Pamer said the argument has been that more uniformity is needed, but he said a bill was already put in place in 2003 which addressed uniformity, noting that the city now accepts any tax form.

He told committee members the city is stuck because if the city loses those tax receipts, they can’t be made up by raising the tax, which is at 1 percent. An income tax must be voted on by citizens and a previous attempt to increase the amount was voted down. The city also tried to reduce the tax credit citizens can use for what they pay elsewhere, known as reciprocity, and citizens placed an issue on the ballot to keep the credit at 1 percent.

Barborak said he’s met with both proponents and opponents of the legislation, noting the business community, Chambers of Commerce and Bar Association all claim the income tax code is harmful to business and claim the legislation is revenue-neutral, which he said isn’t necessarily the case in its present form.

Barborak said he’s been told there likely will be compromise in the end. He said it helps to hear from the communities on where they stand. In its present form, with other cuts to communities already through the Local Government Fund, he said this could be a detriment to the finances of some communities.

When asked by Finance Committee Chairman Councilman K. Bret Apple about where he stands on the issue, Barborak said he’s going to keep an open mind and listen to both sides. As it is now, he said he’s not happy with the bill, but he wants to see the final version and he’s hoping there will be some consensus to satisfy both sides.

In other business, the committee again discussed the idea of a citywide cleanup, with former councilwoman Mary Lou Popa saying the city needs the cleanup and the citizens deserve it. She said other communities do leaf pickup and provide bags to residents and some cities pay for garbage pickup and do cleanups. She questioned what the city does extra for city residents.

Apple took exception to the idea that the city doesn’t do anything for the city residents, noting that a lot of cities have a larger income tax rate than Salem’s 1 percent, giving them more income to do some of those extras. He said he’s not going to rush to do a cleanup, saying he would want to know how much a dropoff event could cost if they follow that idea to have residents drop items off like the recent dropoff event held in the municipal lot near Timberlanes.

Popa, who’s been stressing the need for a curbside event, said not all residents have pickup trucks. She also questioned what could be dropped off and noted that in past years when there was a cleanup, she estimated 30 percent got picked up by other residents who scoured the city looking at everybody else’s stuff.

Apple said that during a previous meeting, Councilman Brian Whitehill, another member of the committee, suggested that community groups could volunteer to help people transport their items to the dropoff event. Whitehill said his feeling was that it should be a community event, but he also said he didn’t feel it was a right of citizens to have a cleanup. He said the question is whether he wants to spend city money on something people should be taking care of themselves.

He repeated his previous comment about having a picker weekend where people put stuff out and other people could pick through it. He also commented that a lot of people live in filth and will continue to live in filth whether there’s a cleanup or not.

Popa commented that it didn’t sound like they were saying the money wasn’t there to do a cleanup. Apple said that would be a fair statement, but he also said if they did everything the administration wanted them to do, then there probably would not be enough money for everything.

Councilman Clyde Brown said he would like to see it happen if the money’s available, but he said it will come down to the money. Weaver also said she would like to see something done, especially for those residents who don’t have a means to get rid of some items or to drop items off.