A proposed Oregon ballot measure, IP-17, claims to raise taxes slightly on large businesses. However, this article argues it would create a much higher effective tax burden.

Misleading Claims

The IP-17 website claims large corporations pay less than 1% in Oregon taxes, while individuals pay 5-10%. This is misleading. Oregon already has a corporate income tax and a gross receipts tax, resulting in a combined state-local tax of 14.2% on corporate net income, plus an additional 0.57% on gross receipts.

Understanding Gross Receipts Tax

Gross receipts taxes are levied on total sales revenue, unlike corporate income taxes which target profits. Most states with such taxes have very low rates (e.g., Washington: 0.471%, Ohio: 0.26%). Oregon’s current rate is also low (0.57%) because it’s combined with a corporate income tax.

IP-17’s Impact

IP-17 proposes a 3% minimum tax on gross receipts for large businesses. This seemingly small increase translates to a much higher effective tax rate on profits. For a business with a 7% profit margin, the combined state and local tax rate could reach 49.6% under IP-17, and a staggering 77.2% when including federal taxes.

Consequences for Oregon

• Higher Prices for Consumers: Businesses are likely to pass on these tax costs to consumers, effectively creating a hidden sales tax much higher than Oregon’s current zero sales tax.
• Job Losses: Businesses may move operations out of state to avoid the high tax burden, leading to job losses in Oregon.
• Disadvantage for Oregon Businesses: Oregon companies would be at a significant disadvantage compared to out-of-state competitors with lower tax burdens.

A Flawed Solution

IP-17 proposes using the increased revenue to fund annual $750 rebates. However, the economic harm caused by higher prices, job losses, and a weakened business environment could outweigh these benefits.

Conclusion

IP-17 presents a misleading picture of its impact. While it appears to be a small tax increase on large businesses, it would effectively create a high hidden sales tax and harm Oregon’s economy.