Fair Share Tax FAQ

Executive Summary

Our ordinance aims to level the competitive playing field for businesses in Portland while shifting some of the exorbitant income gains seen by corporate executives and ultra-wealthy shareholders toward vital public services.

It does this by cutting taxes for approximately 18,000 smaller businesses operating in the city and raising taxes for about 400 large corporations based on how egregiously overpaid their CEOs are relative to their workers.

We propose to do this by increasing the Business License Tax (BLT) exemption threshold to $500,000 in gross receipts and increasing the range and rates of the Pay Ratio Surtax from 0 to 500% of the filing corporation's BLT liability for CEO-to-median-worker ratios from 50:1 to 500:1 and above.

The net effect on the City's budget will be an additional $72 million for the General Fund annually.  The thousands of small businesses who will be exempted are expected to save around $900 per year as well. The two of these combined will allow the City to avoid cuts in core services and promote innovation and employment by local businesses, all of which is crucial for the future livability and prosperity of our city.

Detractors will surely trot out well-worn arguments about Portland taxing companies out of business or how this ordinance will lead to higher prices, but the economics of the matter suggests this simply isn't true.

First, as a portion of sales, businesses pay fairly modest taxes in Portland when compared to many other locations where payroll, gross receipts, and sales taxes are used more heavily for government revenues. Indeed, this is true for Oregon generally, which ranks 8^th lowest in terms of business' share of taxes. Per employee, Washington taxes businesses 32% more than Oregon and California taxes them 44% more.

Second, research suggests that taxes on business net income tend to come out of shareholder income first and foremost, and secondarily out of the pay of corporate executives—the very people who have seen astronomical increases in their incomes over the last several decades while wages stagnated. By targeting those corporations with high CEO-to-median-worker pay ratios while at the same time cutting taxes for small businesses, our ordinance further focuses revenue generation on the people who have been getting away with not paying their fair share. 

What does the Fair Share Tax ordinance do?

In broad strokes the ordinance proposes to:

1. Increase the Pay Ratio Surtax paid by publicly traded businesses depending on their CEO-to-median worker pay ratio; and
2. Increase the City of Portland Business License Tax (BLT) exemption for small businesses

But let's get into the details.

Pay Ratio Surtax Increase

Since 1854, Portland has required licenses for all businesses operating in the city. With exemptions for small businesses, this includes a Business License Tax (BLT) of, currently, 2.6% of net income, or profit, generated in the city. In addition, publicly traded companies are required to pay a surtax if the ratio of their CEO-to-median-worker pay is 100:1 or more. Reporting of this ratio is required under the Dodd-Frank Act.

The current Pay Ratio Surtax rates are an additional tenth of the business' BLT liability if their CEO's pay is 100 times the median worker's up to 250 times the median worker's pay, and an additional quarter of the current tax bill if the CEO's pay is 250 times the median worker's pay or higher. Note that these rates are applied only to the tax liability, which in turn is derived from the 2.6% rate on net income.  So a company with, say, a 300 to 1 pay ratio would effectively pay 2.6% plus 25% of the 2.6%, or 3.25% tax on net income.

This ordinance would increase those rates as given by the first two columns in the table below:

Revenue estimates based on FY24 collections as of April 30, 2026. Updated estimates from the City's Revenue Division are similar.

Thus, publicly traded companies falling in the 100 to 1 to 250 to 1 bracket would pay an effective tax on income of 5.2%; those with pay ratios between 250 to 1 and 500 to 1 would pay 9.1%; and those with pay ratios equal to or greater than 500 to 1 would pay 15.6% of net income.

It must be emphasized that Portland's BLT is on net income, not gross receipts, sales, or payrolls. This means a much smaller figure is being taxed than would be the case, especially, with a gross receipts tax or a sales tax. For instance, if a business' net income is 10% of its gross receipts and its pay ratio is over 500 to 1, the effective tax on gross receipts is still only 1.56%, well below gross receipts and sales tax rates in other municipalities (more on this below).

Increase in Exemption for Small Businesses

Currently, businesses with total gross receipts of less than $75,000 are exempt from the business license tax. That threshold will increase to $100,000 next year. This ordinance proposes increasing the threshold to $500,000. The estimated number of filers impacted, and lost revenue are given in the table below:

Revenue estimates based on TY24 collections as of August 11, 2026. Updated estimates from the City's Revenue Division are similar.

Food carts are a good example of a business falling in this range, with many doing 100-200 thousand dollars in gross receipts annually and more successful food carts doing upwards of 400 or 500 thousand dollars. Other examples would include small neighborhood pet groomers and landscaping companies.

Why raise the Pay Ratio Surtax?

The typical modern American megacorporation is a predator. It preys on consumers through price gouging—the real cause of the pandemic inflation—, on workers, on government funds, and on the natural environment. Large U.S. companies no longer reinvest profits into innovation and productive capacity, preferring instead to suppress wages and pump up stock prices with share buybacks. Delivery of a useful product at a competitive price is an afterthought at best. This is the age of enshitification and the trillion-dollar CEO pay package.

For all of this, these corporations have been rewarded over and over again with tax breaks and deregulation. The top tax rate on corporations at the federal level is less than half of what it was before the Reagan era, and the Trump tax cuts of 2017 cut the effective tax rate on large corporations from 22% to just 12.8% (more on this below).

View full size image of Corporate-Tax-Cuts--Rising-CEO-pay--stagnant-worker-pay.

Data sources: Pay Ratio: Economic Policy Institute; Tax Rates: Tax Foundation

The Pay Ratio Surtax operates directly on the pernicious values of these mega corporations and takes a small step toward reversing the tax breaks of the neoliberal era. Rather than tax businesses for making sales (as do gross receipts and sales taxes) or on employing people (as does a payroll tax), it taxes them only on their profits, and it increases that tax rate substantially when the numbers indicate that executive pay and wage suppression are driving company decision-making.

What is the impact on the City's budget?

The increase in the BLT exemption threshold would result in a reduction of revenues to the City of approximately $16 million and exempt 18,000 businesses operating in Portland from paying a BLT (note, these figures represent updated information from the Revenue Division and differ slightly from those given in the tables above). The lost revenue would be more than offset by the increased rates on the Pay Ratio Surtax, netting the City around $72 million annually.

However, due to the volatility in CEO pay from year to year and therefore in the revenue collections from the Pay Ratio Surtax, it is recommended that a sizable reserve be established with clear policy for placing windfall revenues in the reserve and restricting drawdowns. We will be working with the City's CFO to ensure an appropriate reserve policy is created. The City Economist has applied a similarly conservative approach to forecasting future revenues, producing an estimated $33 million net revenue on average for Fiscal Years 2030, 2031, and 2032. The difference reflects the need to maintain a sizable portion of expected revenues in reserve.

Won't these corporations just leave Portland?

Not if they've got any business sense. The Business License Tax takes a small percentage of the profits generated in Portland—remember, this is a tax on net income from doing business here, not on businesses headquartered here. That money helps to pay for public safety, summer programs in the parks, and all the things that make Portland a good place to live and do business in.

The base tax is 2.6%. That's just $26 on a net income of $1,000, leaving 974 reasons to keep doing business in Portland.

Now, for the megacorporations whose stocks are traded on the stock markets and who hand their CEOs grossly inflated pay packages, the effective tax rate is going to be higher because of the Pay Ratio Surtax. Here are the effective tax rates once the surtax is factored in, both currently and with our ordinance.

On average, larger corporations will usually fall somewhere in the 5.2 to 9.1% range, largely depending on how well the stock markets are doing (that's where most CEO pay comes from). Let's think about a hypothetical megacorporation doing, say, $100 million in sales in Portland. Let's say it has a 7% profit rate, so net income of $7 million just in Portland, and it pays its CEO $31 million and its median worker $17,000 (just borrowing Starbucks' pay numbers here). This puts this hypothetical corporation in the top surtax bracket under our Fair Share Tax structure with a CEO-to-worker pay ratio of 1,794 to 1.

With that pay ratio, the corporation will be paying 15.6% on its $7 million net income to the City. That's a tax liability of $1,092,000, versus $227,500 under the current rate structure. The question is how that very well-compensated CEO would respond to the extra $864,500 tax bill from the City of Portland. Would it make sense to stop doing business in Portland, to walk away from the $100 million in sales? Are there better options?

Pulling out would reduce profits by about $5.9 million (the $7 million net income minus the tax liability), with no discernable financial advantage to the company or its shareholders. Portland probably wouldn't be hurt by this as those $100 million in sales would be grabbed by smaller businesses—maybe local coffee shops who just got a tax cut—and/or larger competitors with narrower pay differentials and therefore smaller tax liabilities. For instance, a corporate competitor that pays its CEO less—let's say $5 million—and its workers a bit more—let's say $19,000—(just borrowing Dutch Bros pay numbers here) would see nearly half a million dollar lower tax liability to the City on the same net income. That in itself is a competitive advantage.

This hypothetical competitor would probably be happy to expand if the CEO making $31 million decides to pull out of Portland in protest. Alternatively, that very well-compensated CEO, who presumably is paid so well because they don't make bad business decisions, might decide to narrow the pay gap by raising wages.

But aren't taxes on business already high in Portland?

Actually, not really. It's common to see articles and editorials from the corporate press and think tanks claiming that taxes are too high. Jared Walczak of the Tax Foundation, for instance, argues that "Portland has the highest business taxes" before carefully constructing a list of the particular ways in which business taxes are indeed high in Portland while ignoring the ways in which they're not.

This sort of analysis is just part of today's economic system: large corporations don't just produce goods and services, they produce (or fund) legislation and political messaging. (The Chair of the Board of the Tax Foundation, David Lewis, is a former Eli Lilly executive, for instance, and other board members serve as executives or counsel at companies like Amazon (Kurt Lamp), Apple (Phil Bullock), Microsoft (Tom Roesser), and Proctor & Gamble (Tadd Fowler).) Naturally, it's in these companies' interest to tell people—and politicians—that their taxes are too high. And in recent years these efforts have paid off. From Fiscal Years 2021 to 2024, 33 states cut their corporate income taxes, while only 1 raised theirs (Dadayan 2024, p. 69).

At the state level, Oregon generally comes in at around the average or below in terms of taxes on business. According to Phillips and Sallee (2024) Oregon ranks 30^th (lowest to highest) in terms of state and local taxes on business as a percentage of Gross State Product (4.7%, compared to New Mexico (the highest at 10.6%), North Carolina (the lowest at 3.2%), and a national average of 4.5%). Per employee, businesses pay $7,900 per year in Oregon, versus a national average of $8,600. Tax collections per employee in neighboring Washington and California are 32% and 44% higher than Oregon, respectively. Nationally, businesses pay 46% of state and local taxes. Oregon businesses, however, only pay 40%, making the state the 8^th lowest in terms of business' share of taxes, and well below states like Washington (50%), Florida (54%), and Texas (60%). (The report does not consider sales taxes in general in its analysis.)

But what about Portland specifically? The reality is Portland is not a low-tax place, but it's also not among the highest-tax cities in the country by any reasonable measure (see Dean 2025 for more). Like in many cities, businesses in Portland are subject to a number of different taxes at multiple jurisdictional levels. This makes comparisons complicated, but not impossible. Let's dig into the numbers and see if Portland really does tax businesses more than other places.

Governments tax business in many different ways. We'll consider four important ways here, each of which can be thought of as taking a percentage of one or another part of the business' income (or P&L) statement. At the top line are taxes on gross receipts or sales taxes. Both of these essentially take a percentage of every dollar the business brings in. (Sales taxes are often treated as a tax paid by the customer, not the business, but that's not exactly how that works; more below.)

Somewhere below that line are the expenses that make up payroll, another common way governments collect tax revenue from businesses.  And at the bottom of the statement is the business' earnings or profits—usually referred to as net income for tax purposes.

Because these taxes take a percentage of different parts of the P&L statement, they're not directly comparable in terms of rates. A 5% tax on sales is a much bigger dollar figure than a 5% tax on payrolls, which is in turn bigger than a 5% tax on net income. Think of it like deductions on your personal income taxes. If you paid taxes on your total income, rather than your taxable income (after deductions), you'd be paying a lot more.

To make an apples-to-apples comparison, we can simply adjust the non-top-line taxes (payroll and net income) to the equivalent rates if they were taxes on the top line—that is, gross receipts (for details, see the last question in this FAQ, "Hey, show your work!"). This, of course, means businesses with above- or below-average payrolls and net income relative to total sales will pay higher or lower rates, but the exercise will get us close enough to make useful comparisons across jurisdictions. To that end, here's Portland and three other cities:

Table does not include state-level payroll taxes or unemployment insurance taxes which are common among most states and tend to be small; nor does it include taxes on business property which tend to be significant nationally, but with these states falling below the average. Also, not included is Pennsylvania's gross receipts tax which is small and levied only on certain industries.

Notice that Portland's various tax rates sum to a fairly large number, just under Seattle's. But after converting to the equivalent tax on gross receipts, these rates become very small. Indeed, because Oregon and the jurisdictions therein do not have a sales tax, the actual tax burden is much lower than other cities.

Won't this just be passed on to consumers anyway? Why not just do a sales tax?

This gets us into tax incidence, a subject economists love to nerd out on. Let's think about the basics first.

If you tax businesses for selling a particular product, their first instinct is going to be to raise the price on that product to compensate. But, and here's where it gets interesting, when they raise the price they're going to lose sales. So how much of that tax burden is borne by consumers ultimately comes down to the ability to pass the tax on without losing too many sales.

Consider a tax on one particular product with a clear substitute—something like Pepsi. If the government said "anyone who sells a bottle of Pepsi has to pay us 50 cents," PepsiCo. would immediately think to raise their prices by 50 cents. But with Coke right next to the Pepsi bottles in the cooler they'll probably think twice. Maybe Pepsi drinkers would tolerate a 10-cent price difference, but 50 would make a lot of them switch to Coke. 

Because consumers have options, sellers in this sort of scenario are not able to pass very much of this tax onto consumers. Economists would say the relative elasticity of demand is large, so most of the tax burden, or ‘incidence', falls on the supply side—that is, the seller.

Now consider a general sales tax. With the pressure to raise prices distributed across (nearly) all consumer products, there simply isn't much opportunity for consumers to substitute into an untaxed item, so businesses can pass on most of the tax to consumers through higher prices. 

Lawyers and judges will quibble over who is legally on the hook for the tax, but economists, who are widely understood to be wiser and more careful in their reasoning as well as more fun to be around, know that it really comes down to the capacity to pass the tax on through higher prices relative to the capacity to walk away from the deal. Sales taxes are designed to pass as much of the tax on to consumers as possible by leaving no opportunity for substitution. 

No one pretends otherwise. In places with a sales tax, the tax component isn't generally included on the sticker price, and consumers just know that whatever's in their cart is going to cost some percent more at checkout. 

This is why the Prosperity Council, which has 3 or 4 people connected to big business for every person not connected to big business, recommends increasing ‘consumption taxes' and reducing income taxes at the state level. Large corporations don't mind a consumption tax, even though every economist knows that they share in at least some of the tax burden.  The reason? They know they can pass most of that tax onto consumers. And because low-income households devote more of their income to consumption rather than wealth building, the ultimate effect is to make Oregon's tax structure more regressive than it already is.

I told you economists love to nerd out on this topic. But let's get back to the actual question: will the tax increase for larger corporations be passed on to consumers? 

The short answer: minimally, if at all. A 2016 report did not find a correlation between corporate taxes and consumer prices at the state level (p. 3):

View full size image of Business-taxes-as-a-share-of-corporate-profits

That study found that large retailers tend to price consistently within regions and often nationally, with transportation costs providing a better explanation of the price variations that were found.

What's more, because our ordinance raises only the surtax based on CEO-to-worker pay, most of the impacted corporations are likely to find themselves in competition with other businesses with lower tax burdens. That competition will add additional pressure to keep prices from rising.

So who does bear the burden of this tax?

A tax on business net income targets a different part of the financial structure of businesses than other taxes. Whereas a sales tax and its sister policy, the gross receipts tax, collect a percentage of all the money a business makes from selling goods and services, the business license tax on net income only grabs a fraction of the profits—that is, the money left over after taking out the cost of materials, labor, rent, utilities, other overhead, interest, and so on.

Businesses don't typically treat this sort of tax as just another direct cost in the production and sale of whatever they make. Instead, they think of that net income as a pool of funds for things like bonuses to upper management, dividends, and share buybacks. The question becomes less about how to pass the tax on to consumers through higher prices (at the top of the P&L) and more about how to pass the tax on to the C-suite and absentee owners.

To better understand this, we can look at two fairly recent changes in the corporate income tax at the federal level. Do you remember what happened in the stock markets on November 9^th, 2016—the day after Donald Trump was elected?

The markets boomed:

View full size image of DOW Jones Industrial Average

This was largely because the election confirmed that a massive tax cut was coming for the biggest corporations. Those ‘Trump tax cuts' (officially, the 2017 Tax Cuts and Jobs Act) brought the top marginal tax rate on corporations to its lowest level in over 70 years while increasing the federal tax rate for smaller corporations. The Institute on Taxation and Economic Policy estimates that the effective tax rate of large, profitable corporations for which data is available dropped from 22.0% to 12.8%, saving those businesses billions of dollars every year.

This is a good case study to see who bears the burden of corporate income taxes—or in this case, whose burden was lifted. And the research is pretty clear: Kennedy et al. (2024), for instance, found that 51% of the benefits from the Trump tax cuts flowed to owners—that is, principally, wealthy stockholders—, another 10% flowed to just the top five executives at these corporations. No discernable benefit went to the bottom 90% of workers.

Of course, the effects of a tax cut may not be symmetrical to a tax increase.  Risch (2023) analyzed the impact of the American Taxpayer Relief Act under the Obama Administration which repealed the ‘Bush tax cuts' of 2001 for top earners and effectively increased taxes on some corporations. That study found that owners of these corporations, disproportionately high-income households, effectively paid 80% of the tax increase, with workers—but only those in the top 30%—paying the majority of the remainder. Importantly, Risch found no change in workforce composition, no decrease in the size or productivity of firms, and no indication of higher prices resulting from this tax increase.

So the evidence suggests that taxes on business income are borne primarily by shareholders, executives, and the highest-paid workers (see the literature review in Gale and Thorpe 2024 for more). This is precisely why we're targeting the Pay Ratio Surtax. As the City, like so many others, including our own workers, struggles to make ends meet, we are proposing to raise taxes on the people who have benefited wildly from generations of neoliberal policy, from right-wing tax cuts, and from corporations pursuing a ‘downsize and distribute' approach over a ‘retain and reinvest' approach (Lazonick 2015). At the end of the day, this is a matter of paying their fair share.

Hey, show your work!

For the comparison of effective business taxes in Portland to other cities, we've assumed the same 7% average net income as in the Tax Foundation's analysis from above. We also assumed that payrolls are 16.8% of sales, reflecting the national figures from the 2022 Economic Census.  If, for example, a business' payroll is taxed at 10%, and its payroll is 16.8% of its total sales, then the tax is effectively 10% of 16.8%, or 1.68% of its sales.

As noted earlier, the numbers given are sensitive to the assumptions made here. Businesses with higher profits will be paying a larger share of their sales to taxes. A large retailer with 20% net income, for instance, might pay somewhere around the same taxes in Portland as in Pittsburgh. A retailer like Walmart with, say, net income of 4%, however, would only pay a little over 2% of their sales. Businesses would need to have net incomes of nearly 50% of sales for the effective tax rate in Portland to rise to those of San Francisco or Seattle.

As noted above, gross receipts taxes are essentially the same as sales taxes, but they are a little different. Because gross receipts taxes apply to all businesses, including those who only sell to other businesses in the supply chain, the effect of the tax can actually compound—economists call it ‘pyramiding'—as intermediate goods move through the supply chain to ultimately become a finished product. Sales taxes, in contrast, only tax the sales of the finished product. To convert sales tax rates into an equivalent gross receipts tax rate, we've used the estimate from Andre Barbe at Rice University. Barbe finds that a gross receipts tax of 1 percent is equivalent in revenue generation to a retail sales tax of 1.78%. This means a 10% sales tax is the equivalent of a 10/1.78, or 5.6% gross receipts tax.