County revenue proposal treats taxpayers as equally as the law allows.

Byline: GUEST VIEWPOINT By Bill Dwyer For The Register-Guard

A quirk of Oregon statute and history is generating inordinate attention from some pundits, while the merits of the design of the proposed county income tax, Measure 20-114, are obscured or ignored. Because misperception travels halfway around the globe while truth is tying its shoes, it is necessary to revisit the basis for exempting some state and federal retirement benefits from county income taxes. In a word, it's the law - ORS 238.445, in particular. Quirky, because the history of the policy that prohibits local governments (all 36 counties and hundreds of municipalities in Oregon) from taxing Public Employees Retirement System benefits started as a simple way to enhance the value of state retirement benefits.

Public employees who were members of PERS were promised that their post-retirement benefits would not be subject to Oregon or local income tax. Thousands of local and state employees were hired and retained their public sector jobs on the basis of that promise and others.

When legislative prerogatives become policy, however, sometimes folks object and the courts are asked to weigh in. That's exactly what happened in the mid-1980s, when the U.S. Supreme Court ruled that equal protection for federal retirees meant that their benefits must be exempted from Oregon income taxes as well.

In the wake of that court case, the Legislature began taxing PERS retirement benefits in order to retain the legal authority to tax federal retirement benefits. After PERS retirees and active employees sued under contract law and prevailed in court, the Legislature was forced to adjust the retirement benefits to compensate for imposing a state income tax.

The Legislature also retained the prohibition against local governments taxing state and federal retirement benefits. Social Security benefits have been exempt from local income taxes in Oregon since 1985. That is the basis for Lane County's proposed income tax exempting some federal and state retirement benefits.

A few other facts to consider:

The Lane County income tax does not exempt other forms of income earned by state and federal retirees, only specific payroll-related benefits. Federal and PERS retirees will be subject to the tax on certain dividend and interest income, as well as income from rental properties and other enterprises, just like everyone else.

The property tax relief built into the Lane County income tax code will not be available to state and federal retirees, to the degree their benefits are exempt. If you don't earn taxable income, you receive no property tax relief.

The income of nonretired PERS members is fully taxable, just like everyone else's income.

Honest people can have honest disagreements over fairness. If the interaction between the federal, state and local tax codes was totally under our control, a fairer outcome might be reached.

But in the meantime, taxpayers should understand that the Lane County Board of Commissioners took deliberate and thoughtful steps to make the proposed income tax as progressive, fair and broad-based as possible.

Some say we should exempt all retirement income from the tax to be fair. That suggestion falls short on several accounts. First, it would put even a greater tax burden on active workers in order to produce the same level of funding. Fair to working class families? Perhaps not.

Secondly, it would further disconnect the beneficiaries of the dedicated public safety fund (funded by the income tax) from the expectation of contribution. Or put simply, while many retirees are on fixed, moderate incomes, many others are reaping the rewards of a life of hard work and frugal lifestyles, and have the means to make some contribution.

All retirees - all citizens, in fact - benefit from having a safer, more secure and civil community. After exhausting funding methods based on property, sales or other specialty taxes, our board opted for an income tax as the best way to pay for improved public safety. I submit that asking everyone for some contribution to that outcome is not only fair, it is right.

Bill Dwyer of Springfield is chairman of the Lane County Board of Commissioners.