I have been seeing a lot of ads for and against ballot measures 66 and 67 recently, and just received this article from the Oregon Association of Realtors. Being an independent contractor that has to pay taxes out of my pocket, besides paying thousands of dollars every year in desk fees and marketing costs, a gross receipts tax would definitely hurt my business. While I do understand the need for more revenue in this tough economy, I don't think hitting businesses is a great way to do it. Furthermore, this would be a permanent solution to a temporary problem. In order for Oregonians to have jobs, we need businesses to be hiring and coming to Oregon. If we continue to add taxes, how are we going to attract more large companies to move their operations to Oregon? We have one of the highest unemployment levels in the country, and I believe these kinds of taxes are part of the reason why.
Below is a recap of the effects of these measures on Oregon business:
New, permanent taxes will hurt all Oregonians and businesses
In the midst of the worst economic crisis in more than 70 years, the legislature increased overall state spending by $4.7 billion and voted to permanently increase taxes on businesses and higher-income Oregonians by $733 million - the biggest tax increase in Oregon history.
During the 2009 legislative session, a unified business community strongly opposed the permanent tax measures and proposed a balanced, short-term solution that essentially matched spending cuts with temporary, broad-based tax increases. Virtually the entire business community supported raising the corporate minimum tax. The legislature chose to ignore the recommendations of the business community to pursue new, permanent tax increases, including a gross receipts tax of up to $100,000 on businesses that are not making a profit.
The Oregon Association of REALTORS® Opposes Ballot Measure 66 & 67 for the following reasons:
1) Since the start of the recession, Oregon has lost 131,500 private sector jobs according to the Oregon Employment Department. In November, 64.4% of Oregonians were employed; the lowest labor-force participation has been since 1978. With unemployment at 11.1% and 211,424 Oregonians out of work, leading economists estimate that the new, permanent tax increases will cost an additional 70,000 Oregonians their jobs. The new, permanent tax increases are projected to further depress the struggling Oregon economy, negatively impacting efforts to stabilize and stimulate the real estate market. It is no secret that Oregonians must have jobs if they are going to be able to purchase and maintain a home.
The health of the real estate market in many regions of Oregon is directly tied to in-migration from other states. With the highest marginal income tax rate in the nation, Oregon will become less appealing for relocation for businesses and individuals. In addition, the taxes will have a direct impact on the Multiple Listing Services, as a gross receipts tax has a disproportionate impact on those businesses that have high volume (regardless of any actual profit).
2) Tax proponents portray Measure 66 and 67 as the only way to fund education and other essential public services. This is simply not true. The Oregon REALTORS® are supportive of a strong education system and protecting essential community services. The fact is the 2009-11 General Fund budget is $485 million higherThe touted budget "cuts" actually reflect an increase in spending, just a smaller increase than anticipated. The legislature has an array of options (including $1 billion in cash reserves), and could maintain current budgets by using existing state agency cash reserves, reducing personnel costs or potentially pursuing a more responsible, short- term tax measure. than it was in 2007-09 and includes $259 million in salary increases for state employees.
3) The corporations that pay Oregon's current $10 minimum tax are businesses that have not made a profit or have no taxable income. Businesses that make a profit pay the corporate income tax on those profits. Measure 67 changes the $10 flat fee for businesses that have no taxable income to a sliding scale between $150 to $100,000 -- based on a company's gross sales, not net profits. This new gross sales tax disproportionately impacts high-volume sales, low margin businesses like home builders, grocery stores, restaurants and gas stations.
In fact, most states have no minimum tax on businesses that aren't making a profit. Among those states that do levy a minimum tax on corporations with no profit, 17 charge an average of $200. All but two of these states have a flat rate minimum, like Oregon's. Only New York and Minnesota have graduated minimum taxes based on total sales, similar to Measure 67. Those two states levy a maximum fee of $5,000. The legislature's proposal would tax companies with no profits from $150 to $100,000 -- 20 times as much for the privilege of operating and losing money in Oregon, giving us the highest corporate minimum or 'no profits' tax in the country.
4) Measure 67 amounts to a 40% total increase in state corporate taxes for 2009-11. The corporate income tax rate will go from the current 6.6% to 7.9% in 2009 and 2010. That's nearly a 20% increase in just one of the three components of Measure 67's corporate tax hike. (Corporate income tax increases, corporate minimum tax increase based on gross sales and corporate filing fee increases.)
5) Under Measure 66, the tax rate goes from 9 to 10.8 % for individuals earning more than $125,000 a year and from 9 to 11% for individuals earning more than $250,000 a year. This gives Oregon the second highest income tax rate in the nation -- higher than both New York and California. Furthermore, according to the Legislative Revenue Office, 66% of tax filers targeted in the personal income tax increase are small and family-owned businesses and farms who report their business profits on their personal income statements.
6) The proposed tax increases would be retroactive to January 1, 2009, and no money to cover the tax increase has been withheld from Oregonians' paychecks during all of 2009.
To learn more about Ballot Measure 66 & 67 visit:
For more information about the campaign in opposition to the tax measures, visit: www.stopjobkillingtaxes.com
The economic studies below illustrate the negative impact the new, permanent tax increases pose to Oregon's economy and job market.
William B. Conerly, PhD, a Portland-based economic consultant and former Senior Vice President of First Interstate Bank, estimated the personal income tax increases in Measure 66 would cost up to 36,000 Oregonians their jobs by 2015.
Bill Conerly
Another leading Oregon economist, Randall J. Pozdena, PhD, examined the impact of the business tax increases on Oregon employment. He estimates that, over a 10-year period, the business tax increases in Measure 67 would cost 22,000 to 43,000 Oregonians their jobs – on top of the 30,000 lost to the personal income tax increases. These job losses would be in addition to the 131,500 private sector jobs Oregon has already lost in this recession.
Randall Pozdena
There are currently 240,158 self-employed individuals in Oregon including Yours Truly. If each of these were an S-corp like myself, ordering us to pay $150 annually instead of the current $10 fee would be the equivalent of demanding every man, woman and child in Clackamas County give nearly $100 to the state of Oregon each year, simply because they live in Clackamas County. How does that make sense? I sure hope there are SB associations in Oregon with resources to fight this misguided effort at income levelization and entrepreneurial punishment.
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