QuickTake:

Staff anticipate the tax, which will apply to both employees and employers working inside city limits, will go into effect in 2027.

People who work in Springfield may see a new tax on their paycheck next year.

The Springfield City Council unanimously adopted an ordinance Monday, June 1, for a payroll tax that will apply to employers and employees within city limits, each paying at a rate of 0.1%. 

For an employee earning $50,000 annually, the tax would be $50 per year, with the employer also paying an equal amount. City staff will begin work on implementing the tax and anticipate collection beginning in 2027.

The vote came after nearly a year of City Council discussions about a payroll tax, which was suggested by a Fiscal Stability Tax Force convened by Mayor Sean VanGordon to come up with ideas to balance the city’s budget.

City councilors have said the payroll tax is not a fix for the city’s long-term budget challenges. The task force identified it as a near-term strategy to begin to address funding stability for city services.

City leaders say costs are outpacing revenue due to inflation and state laws that limit the growth of property taxes, the primary revenue source for the city’s general fund, which supports police, fire, development and public works and the library, among other departments. 

Springfield Finance Director Nathan Bell has said the payroll tax will diversify the city’s tax base and make it more equitable. More than 75% of Springfield’s workforce doesn’t live in the city, Bell said, and therefore doesn’t contribute to the property taxes that pay for city services. 

The City Council held two public hearings about the payroll tax with mixed support — including some community members asking for the tax to be set at a higher rate. 

The tax is expected to generate $2.45 million within its first year. The ordinance, which adds the Springfield Payroll Tax Code to the city’s municipal code, calls for revenues to be budgeted in a separate fund. It also states the rate can’t be changed for three years and that staff should review the tax in 2030 to determine its impact on the general fund. 

The city manager will report annually to the council about the tax and how its revenues are being used, according to the tax code. 

Employers with a physical address in Springfield will pay 0.1% of the wages they pay to employees, while employees will pay 0.1% of the wages they earn, which will be withheld through payroll. The tax also applies to the net earnings of independent contractors who perform services at a physical location in the city. 

If an employer operates both inside and outside of Springfield, wages earned for work performed outside city limits are not subject to the tax. 

The federal government, the state of Oregon and political subdivisions of the state are exempt from the tax.

Have something to say?

Send us a Letter to the Editor. Read our guidelines for Letters to the Editor here.