Cities obtain funding for most of their operating budgets from property taxes, and most city officials are well aware of the constitutional limitations placed on these taxes. In these challenging economic times, cities across Oregon have contemplated the use of alternative forms of taxes to assist with funding specific programs. Such taxes, however, come with their own constitutional limitations, and the prohibition on head and poll taxes is one such limitation cities must keep in mind when considering whether to enact these alternative forms of taxation. Background – Poll and Head Taxes
Article IX, section 1a of the Oregon Constitution provides that “[n]o poll or head tax shall be levied or collected in Oregon.” Oregon courts have explained that a poll or head tax is a fixed tax assessed on each eligible person. See City of Portland v. Cook, 170 Or. App. 245, 250-51 (2000) citing Oregon City v. Moore, 30 Or. 215, 217, (1896) (describing “a poll tax of $2 upon each and every person liable therefor”); Salem v. Marion County, 25 Or. 449, 451-52, (1894) (same). In other words, a head or poll tax is imposed and collected on a per capita basis.
The prohibition in Article IX, section 1a was added to the Oregon Constitution in 1910. The amendment's supporters explained that a poll or head tax “is unjust not only because it is collected from very few of the men who are supposed to pay, but also because it bears so unequally on men in proportion to their ability to pay.” See id. citing Voters' Pamphlet, General Election, November 8, 1910, at 24-25.7 The measure's supporters further explained, “[t]he laborer supporting a family on $2 a day pays exactly the same poll tax as the corporation manager with a salary of ten thousand dollars a year.” Id. Accordingly, Oregon courts have concluded that taxes that are imposed on a per capita basis violate the constitutional prohibition on head and poll taxes.
Last November, voters in Portland overwhelmingly enacted the City’s Arts Education and Access Income Tax (Arts Tax), which imposes $35 per person tax to help Portland-area elementary schools provide funding for arts teachers as well as provide grants to local art institutions. A Portland resident, George Wittemyer, sued the City claiming the imposition of the Arts Tax was an unconstitutional violation of the prohibition on imposing and collecting head and poll taxes.
In Wittemyer v. City of Portland, a Multnomah County Circuit Court judge ruled that the Arts Tax was not a head or poll tax and accordingly was not prohibited by Article IX, section 1a. Circuit Court Judge Kelly Skye ruled that "the Arts Tax is not a Poll or Head tax because it is not assessed per capita.” Rather, as Judge Skye explained “[i]n assessing the tax, the City considers a person’s income in three distinct provisions: the tax applies only to (1) income exceeding $1,000, (2) non-exempt income sources, and (3) income of individuals residing in households with income above the federal poverty guidelines.” Due to these exemptions as well as the fact that the Arts Tax applies only to taxpayers 18 years of age or older, Judge Skye concluded that “the practical effect of the tax is to tax income of certain City residents within a certain income range” and accordingly, the Arts Tax is not a per capita tax prohibited by Article IX, section 1a.
Although only a circuit court decision that does not have the same precedential effect as a decision by the Oregon Court of Appeals or Supreme Court, Wittemyer v. City of Portland, provides important guidance to cities that might be considering the imposition and collection of alternative forms of taxation. In order to avoid claims that such taxes are prohibited head or poll taxes, cities must work closely with their city attorneys and finance directors to draft a tax that is not imposed on a per capita basis but rather on specific criteria. Following the guidance provided by Judge Skye’s decision is a helpful first step in that process.