A tax loogey from Tri-Met (Jack Bog's Blog)

It's the thick of tax season, and we're up to our eyeballs in tax forms -- our own and others'. Here's a nasty wrinkle we stumbled across over the weekend, and it comes from none other than Tri-Met.

It's not breaking news that Tri-Met imposes a tax on the net earnings of self-employed people. It's been doing it for around 30 years. The tax is modeled after the much steeper federal self-employment tax, which finances Social Security and Medicare, and like the federal tax, it's a backup to the Tri-Met payroll tax. The Tri-Met tax is less than 1 percent -- roughly 7/10ths of a percent, but rising in recent years.

If a taxpayer is involved in more than one business, and there's a loss on one and a profit on the other, the feds let the taxpayer net one against the other to determine the base of the self-employment tax. But not Tri-Met -- they give no credit for the losses. Not against this year's profits from other businesses, nor against any future year's profits from the business that's lost money this year. It's particularly vicious, but hey -- that's Tri-Met and its money.

One wonders if the transit agency hasn't overstepped its authority under state law on this point. Does anyone out there know if it's ever been challenged?

Comments (5)

Correction: "that's Tri-Met and OUR money."

Posted by zonedar | April 16, 2012 11:10 AM

Curious -- what is to stop a taxpayer from aggregating all the revenue and expense on a single Schedule C or whatever the state/local equivalent?

Posted by NewLeaf | April 16, 2012 12:02 PM

That's not how the Schedule C works. The lesson here is to have a single point of payment if you are an independent contractor or consultant.

Posted by Aa | April 16, 2012 12:13 PM

One could claim that all their businesses are in fact one business, but that might have other repercussions later on.

Posted by Jack Bog | April 16, 2012 12:56 PM

Surely, Jack, as a tax law professor, you have an informed opinion on this subject.

And this isn't particular to TriMet; it's a matter of state law which applies to other mass transit districts incorporated under ORS 267 and levying a payroll tax as permitted by that statute. Folks in Eugene paying payroll taxes to support LTD have the same issue.

(See here).

'Tis my understanding that TriMet has little to do with payroll tax collection and administration--it just gets money from the state treasury corresponding to those payroll taxes collected by the state on its behalf.

Posted by EngineerScotty | April 16, 2012 2:02 PM

Search this site

About

Clippings

Archives

Links

E-mail, Feeds, 'n' Stuff

Monday, April 16, 2012

A tax loogey from Tri-Met

Comments (5)

Sponsors

In Vino Veritas

The Occasional Book

Road Work