“It’s time for large, out-of-state corporations to pay their fair share.” Sound familiar? This is the mantra of ‘A Better Oregon,’ the coalition pushing for the largest tax hike in Oregon history through Initiative Petition (IP) 28, also known as the “Gross Receipts Tax.”
IP 28 would raise an additional $3 billion each year for the State’s general fund by imposing an additional 2.5 percent tax on businesses with more than $25 million in sales. Money for schools, senior services, and health care. Make out-of-state corporations pay. Sounds great, doesn’t it? So what’s the problem?
First of all, their tag line is misleading. IP 28 doesn’t distinguish between out-of-state corporations and local companies like Hampton. Second, IP 28 is not technically a sales tax, but it is a tax on sales, which makes it worse because it’s levied at every step along the supply chain.
To give you an example from our industry, if IP 28 passes, timberland owners could pay a 2.5 percent tax on logs they sell to manufacturers. Sawmills would then have to pay another 2.5 percent tax on the lumber they sell to distributors. Distributors must then pay the tax when they sell to retailers, who in turn pay the tax again when the final product is sold to customers. Remember this is not a tax on income but sales, which means the tax could be levied even if the business doesn’t make a profit. These companies would have no choice but to pass this new tax on to consumers and smaller businesses. For businesses like our wholesale trading operation, with very low margins, a 2.5 percent gross receipts tax would effectively limit our ability to stay in business. Now imagine this same scenario playing out for groceries, utilities, and medicine.
As CEO, I’m concerned with what impact this could have for our business. As a resident, I’m concerned about the repercussion this will have for all Oregonians. Last month, the nonpartisan Legislative Review Office report found that despite proponent’s claims, IP 28 is a regressive tax that disproportionately burdens low-income people. The report also found that within five years, the gross receipts tax would create 18,000 new public sector jobs at the expense of more than 38,000 private sector jobs.
Anyone who works and lives in Oregon knows the challenges we face to fund education and vital public services. However, tax and policy decisions should be based on a careful and informed examination of our assets, obligations, opportunities, and aspirations and find a way to make these things work together in a coordinated manner that better serves all Oregonians. Let’s develop well-thought-out tax reform that raises a reasonable amount of revenue to fund our public institutions. Knee-jerk reactions never make for good tax policy.
IP 28 will be on the November ballot. I urge Oregonians to vote no.
Learn more:
Brunori, David. “Gross Receipts Taxes Are, Well, Gross.” Forbes. 13 Jun. 2016