Oregon is one of only five states in the country without a sales tax and since the 1930s, voters there have rejected imposing one on consumers nine times. This November, Oregon voters will have an opportunity to weigh in on “the largest tax increase in state history” when a different type of sales tax — that instead taxes a business’s total sales above a certain level — appears on the ballot.
What the Initiative Does
This initiative would increase the minimum corporate tax on gross sales that exceed $25 million by imposing an additional 2.5 percent tax on sales above that threshold. Tax revenue generated by the tax would be intended to fund education, healthcare, and senior services (more on that later). It has been estimated that it would raise taxes annually by $3 billion.
Currently, corporations in Oregon pay either a minimum tax on sales of 0.1 percent, or 6.6 percent on taxable income up to $1 million and 7.6 percent on income above that threshold (whichever is greater). That tax structure would stay in place for sales under $25 million, even if this initiative passes.
It should be noted that the tax would be imposed on gross receipts (or total sales) rather than on profits, like most corporate income taxes.
The initiative will appear in Oregon ballots on November 8 as “Measure 97.”
Oregon has been facing budget shortfalls for years and this initiative would bring in much-needed tax revenue to fund education, healthcare, and senior services. Big businesses need to pay their fair share to fund these priorities, and while it’s possible that these taxes will be partially passed on to consumers, average Oregonians would gain more than they lose.
A tax increase like this will be passed onto consumers in the form of higher prices for the everyday products they buy. This ballot measure is misleading about how tax revenue will be spent because funds will go to the general fund rather than going for education, healthcare, and senior services directly. So, lawmakers in Salem could pass laws to spend it in other areas.
Proponents of Measure 97 have said that funds from the tax increase would go to funding education, healthcare, and senior services. But when lawyers for the legislature were asked whether funding would be restricted to those areas, they said that it “would not bind a future legislature in its spending decisions… the legislature may appropriate revenues generated by the measure in any way it chooses.”
The Oregonian reported that economists for the state legislature and Portland State University said businesses would likely pass this tax to consumers in the form of higher prices for things like groceries, energy, and gasoline — among other items. They estimated that households earning less than $21,000 per year would lose $372 annually to the tax, while those earning between $103,000 to $137,000 would lose $868 per year. The economists also said that while the tax increase wouldn’t lead to layoffs, it would probably reduce hiring by the private sector while the public sector would use the tax revenue to hire more employees.
According to Legislative Revenue Officer Paul Warner, the tax increase would be the largest in the state’s history in terms of dollar amount, though it’s unclear whether it would be when measured as a percentage increase in tax revenue collected.
— Eric Revell
(Photo Credit: Flickr user ChrisHConnelly)
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