SALEM, OR — This morning, July 31, 2025 the Salem Area Chamber of Commerce held the Cherriots Employer Paid Transit Tax Forum and had it open to all Salem Chamber and Keizer Chamber members. 135 people showed up, mostly local business owners, and expressed their concern over this new payroll tax set to be implemented on January 1st, 2026. The Cherriots board expressed that their initial plan is to implement the tax to businesses at a rate of 0.007%per dollar that an employee gets paid. This tax will create a 58% increase of the general funds for Cherriots who are already sitting on $154.7 million dollars, with $57.3 million dollars sitting in their general funds, and $10 million dollars in reserves as included in their 2025-2026 budget. (found on page 37 of their adopted 2025-2026 budget)
Business owners expressed their concerns about a compounding tax rate, while the Cherriots board expressed their need to expand services to serve their constituents. Bill Ricke, Owner of Bark Boys, a local Salem business said: “I think an important piece of this that has been forgotten, is that in the end this will hurt the riders as the goods and services businesses provide will be increased to cover the added tax burden.”
One part of the conversation not touched on much is the opportunity costs involved in this tax. Rich Duncan, owner of Rich Duncan Construction “In the times we are in now, I would vote for faster police response over more frequent buses.” The concern is that voters haven’t been given the opportunity to choose where these tax dollars are going. Instead of us being able to direct our tax dollars towards our Police Department or other vital services, we are forced to pay this tax without having a voice in the matter. When taxes and fees are increased, business expansion and hiring are decreased. This results in a reduced or stagnant tax base which ultimately affects municipal revenue paying for public safety services.
Tom Hoffert, CEO of the Salem Area Chmaber of Commerce stated: “When over 135 Salem & Keizer Chamber members come together to attend a forum regarding Cherriots’ new employer-paid payroll tax, you clearly have the attention of the local community. I wish to recognize Cherriots leadership body for bringing their full Board team and general manager to the event, further substantiating that the concerns of our local businesses are real and that the business voice must me deeply considered as they look to implement this new taxation on January 1, 2026. While the feedback provided by attendees was decidedly in opposition to this new tax, it is now incumbent on our business community, employees, and customers to actively engage with Cherriots leadership to share the impacts this new tax places squarely on our local Salem and Keizer businesses. The Salem Chamber remains committed to informing not only our membership, but the entire business community on governmental actions that will directly affect their bottom line and ability to remain viable in the Salem & Keizer markets. When such new business taxes are rolled out on local owners, without a vote of the very people it will be solely placed upon, we have a communal problem. This is another tax that likely won’t be sent to voters – Oregonians, regardless of political affiliation, do not enjoy such tactics.”
The Salem Area Mass Transit District (Cherriots) is proposing a payroll tax of .007% per dollar that a worker gets paid per hour. The tax is estimated to cost businesses approximately $403 per employee per year for a worker earning the local median wage. This new financial obligation, intended to fund a major expansion of public transit services, arrives at a precarious moment. For businesses, it represents another layer of expense that could translate into suppressed wages, delayed hiring, or higher prices for consumers. For the community, it ignites a contentious debate about funding, fairness, and governance, especially since this tax, by law, does not require the consent of the voters it will ultimately affect.
How the Proposed Cherriots Payroll Tax Works
This is a new tax, not currently being collected, that the Cherriots Board of Directors has the authority to implement as early as January 1, 2026. It is a local tax levied directly on employers within the Cherriots district boundary, which includes Salem and Keizer. Unlike the statewide transit tax, this financial burden falls on the business itself, not the employee.
The authority for this tax does not come from the 2017 transportation package (HB 2017) as is commonly misunderstood. Instead, it was granted by a separate, specific state law passed in 2018 that gave the Cherriots board the power to levy an employer-paid payroll tax without a public vote. That same 2018 law also changed the governance structure of the transit district, switching the Cherriots board from a publicly elected body to one whose members are appointed by the Governor of Oregon. Because this authority was granted by the state legislature years ago, there is no mechanism for the public to vote on whether to approve the tax before it is implemented.
To illustrate the potential impact, consider an employee earning $30 per hour. (This is below the county average of over $33/hr) While Cherriots has not finalized a tax rate, in the meeting with the Salem Chamber of Commerce today, they proposed rate of 0.7% (a figure close to initial estimates) reveals the following cost to an employer for that single employee:
| Time Period | Calculation (Based on $30/hr wage & 0.7% tax rate) | Cost to Employer per employee |
| Per Hour | $30.00 * 0.007 | $0.21 |
| Per Week | $0.24/hr * 40 hours | $8.40 |
| Per Month | $9.60/week * 4 weeks | $33.60 |
| Per Year | $38.40/month * 12 months | $403.20 (per employee) |
This table demonstrates how a seemingly small percentage can accumulate into a significant annual cost for businesses, particularly those with numerous employees. The method for calculating the payroll transit tax is to multiply the gross taxable payroll earned within the transit district by the current transit rate.
How Did We Get Here? A Timeline of Tax Debates
The current controversy is not a sudden development but the culmination of years of legislative action, local political battles, and shifting public sentiment. After a period of voters approving various bonds for specific capital projects like the library and police station, this new tax—which requires no voter approval—feels to many like an abrupt shift in governance. To understand the complex dynamics at play, one must trace the timeline of events that have led Salem to this fiscal crossroads.
1997: Measure 5 & 50
These measures sought to freeze property tax rates creating stability for property owners. This resulted in a permanent levy rate for Cherriots’ property tax. Measure 50 provided every local taxing district a permanent operating rate combining whatever tax levies existed when these measures passed. The property tax rate for Cherriots is $.76 per $1,000 assessed value, and makes them the only transit district to soon have both a property tax and a payroll tax.
2017: The Statewide Foundation
The story begins in 2017, when the Oregon Legislature passed House Bill 2017, a landmark $5.3 billion transportation package hailed as a “transformative investment in Oregon’s transportation system”. A key component of this sweeping legislation was the creation of the Statewide Transportation Improvement Fund (STIF), financed by a new statewide transit tax of one-tenth of one percent (0.1%) on employee wages.3 This tax, which went into effect on July 1, 2018, was a game-changer, representing a more than 200 percent increase in state funding for transit and creating a dedicated revenue stream to expand services across Oregon.
It is an employee-paid tax, withheld by employers and remitted to the state, with the revenue distributed to transit agencies, including Cherriots, to improve and expand services. This statewide tax established a new precedent for using payroll taxes to fund transit, but its implementation was a statewide legislative action, not a local decision. It set the stage by normalizing the concept, even though it applied to employees, not employers.
2018: A Special Law for Salem
While HB 2017 set the statewide stage, the direct legal authority for the current Cherriots proposal comes from a separate, more obscure state law passed in 2018. This legislation was crafted specifically for the Salem Area Mass Transit District, largely at the behest of then-Senate President Peter Courtney, following a failed attempt by Cherriots to pass an employer payroll tax in 2015. The 2018 law granted Cherriots two critical and controversial powers:
- The authority to levy its own local, employer-paid payroll tax on businesses within its district.
- The ability to implement this tax by a vote of its board of directors, without requiring a public referendum.1
This law fundamentally altered the agency’s power and accountability, aligning Cherriots with Lane Transit District (LTD) and the Tri-County Metropolitan Transportation District of Oregon (TriMet). It also changed the Cherriots Board of Directors from a publicly elected body to one appointed by the Oregon governor, further distancing its governance from the direct will of the voters.1 The law stipulated that this new taxing authority could not be used by Cherriots until 2026, setting a political time bomb that is only now set to detonate.
2023: The People’s Veto
The political landscape was dramatically reshaped in 2023. Facing a budget deficit, the Salem City Council, in a narrow 5-4 vote, approved its own payroll tax in July. This tax, known as the “Safe Salem” tax, was a 0.814% tax on employee wages for work performed in the city, intended to raise $27.9 million annually for the city’s general fund to support police, fire, and homeless services.
The council’s decision to pass the tax without a public vote sparked immediate and fierce opposition. Then-Mayor Chris Hoy defended the move, citing the urgency of the city’s financial situation. “A failure to impose this tax would mean a complete decimation of city services,” he stated, arguing that council members had information about the budget crisis that the average voter did not. He also pointed to the practical difficulties of running a successful tax campaign, noting, “I believe the prospects of raising that amount of money and finding councilors willing to spend the time necessary to run a campaign would be virtually impossible”.
The business community, however, saw it as an overreach. The Salem Area Chamber of Commerce and Oregon Business & Industry (OBI) quickly organized a petition drive under the banner “Let Salem Vote”. Tom Hoffert, CEO of the Salem Chamber, articulated the business community’s stance during public testimony: “The small business community has requested that local social service initiatives be financially reprioritized and funded only after public safety and infrastructure have received adequate funding in the City’s annual budgeting”.
The campaign successfully gathered nearly 13,000 signatures, forcing the tax onto the November 2023 ballot. The result was a stunning and unambiguous rebuke. Voters rejected the measure by an overwhelming margin, with 82% in Marion County and 84% in Polk County voting no. Preston Mann, OBI’s Political Affairs Director, called the outcome “not at all surprising,” stating, “The opposition to this campaign was emphatic and immediate. Complex, costly and unique taxes that address local shortfalls create significant problems for employers and employees. Voters agreed”.11 The vote exposed what one city councilor termed a “citizen trust deficit” and sent a clear message about the public’s appetite for new taxes without their direct consent.
2024: A New Mayor, A Clear Mandate
The fallout from the 2023 tax battle directly influenced the 2024 mayoral election. Julie Hoy, a city councilor who voted against the payroll tax, ran on a platform of fiscal conservatism. Her campaign materials declared her commitment to “Oppose unnecessary taxes and fees” and reminded voters, “I actively opposed the payroll tax and will do everything to avoid increases to taxpayers”. She was elected in May 2024, a victory widely interpreted as a public mandate to hold the line on taxes.14
2025: The Cherriots Proposal Emerges
Against this backdrop of voter revolt and a new mayor, Cherriots has now announced its plan to activate the authority granted to it in 2018. The transit agency is proposing its own employer-paid payroll tax to be implemented on January 1, 2026. The tax is projected to generate approximately $39 million in its first year, which Cherriots frames as a transformative investment. General Manager Allan Pollock states the funds will allow for a 47% increase in service hours over five years.
The money is earmarked for specific, ambitious goals:
- Immediate Expansion: Increasing early morning weekday service and expanding micro-transit options.
- Long-Term Growth: Increasing bus frequency on weekdays and late nights, adding new routes, and purchasing more buses.
- Major Capital Projects: Funding the long-delayed south Salem transit center and building a new transit hub in east Salem near Chemeketa Community College.
Pollock argues the tax is an investment that will ultimately benefit businesses. “I believe Cherriots does an excellent job, but with increased investment… Cherriots can be a bigger catalyst to improve community livability, not only for the residents, but for its business community,” he said, noting that expanded weekend and nighttime hours could boost shopping activity.1
What Now? The Compounding Pressure
Now that the Chamber of Commerce has held their “Cherriots Employer-Paid Payroll Transit Tax Forum” event. The stage is set for a major confrontation between a public agency exercising its legal authority and a business community and electorate that have clearly voiced their opposition to new taxes imposed without a direct vote.
Adding another layer of complexity and financial pressure, Oregon lawmakers are scheduled to meet for a special session on August 29, 2025, to address a statewide transportation funding crisis.15 A key part of Governor Kotek’s proposal for that session is to double the existing statewide employee-paid payroll tax from 0.1% to 0.2% to prevent massive service cuts at transit agencies across Oregon. This means that at the same time Salem businesses are facing a new employer tax from Cherriots, their employees could see the state transit tax taken from their paychecks double. This convergence of local and state tax proposals creates a perfect storm of financial pressure, ensuring the debate over the Cherriots tax will be intense and closely watched. A summary of the developments from these meetings will follow as this story continues to evolve.