Legislators Mess with Our Business & Our Economic Future



The Oregon legislature just passed $733 million in permanent tax increases that we believe threaten jobs, harm businesses of all size and hurt the state’s ability to recover from this economic crisis. The income (HB 2649) and corporate (HB 3405) tax increases will be exceptionally harmful to the state’s small businesses.  On a strictly party line vote, Senate Democrats voted to raise income taxes on high-income earners, even though 75 percent of the 31,000 Oregonians affected by HB 2649 are owners of small and family-owned businesses.

HB3405 imposes a new tax schedule on businesses that are losing money or are minimally profitable, raising the tax from the current $10 level to up to $100,000.   Manufacturers, retailers, and construction companies that are struggling to survive will find themselves encumbered with new tax burdens.  In addition, the legislation permanently increased tax rates on corporate profits, from 6.6 to 7.9 percent for the next three years, dropping slightly to 7.6 percent thereafter.   All told, corporate income taxes will go up over 30 percent.  We are deeply concerned by the impact of these measures on job retention and creation, as well as overall economic growth.

HB2649 creates a new tier for personal income and capital gains taxes for those earning more than $125,000 of 10.8 percent for the next three years (11 percent for those earning more that $250,000), and a 9.9 percent rate thereafter.

A recent study by ECONorthwest shows that income taxes on Oregonians earning between $100,000 and $200,000 are already the highest in the nation.  We are third from the top for those earning $200,000 or more.   In contrast Washington state has no income or capital gains taxes
at all.

Already at the bottom of the economic crisis in the nation, businesses will be hard pressed to stay in the state and make a profit and certainly other firms will look disparagingly on a state that chooses to raise taxes during this recessionary period. Remember Oregon currently has the second highest unemployment rate in the nation.

It doesn’t take a brain surgeon to understand that raising taxes during an economic crisis of this magnitude means a significant slowdown in Oregon’s economy.

Those legislators voting for these increases believe that the only way around the state’s projected deficit is to increase revenue, rather than make hard cuts in government spending that should include state employee wages and benefits. Legislators should also be looking at the rainy day fund as well as existing reserves to support vital services.

Adding to the insult on business the House also passed a $433 million tax increase on health care (HB3405). The funding plan has two components: an increased hospital tax and a one percent tax on the commercial insurance premiums collected by health plans and insurers.

The measure raises taxes on hospitals and health insurance companies. The hospital insurance tax would increase from 0.63 percent to 1.5 percent of hospital’s net revenue.

While the intent on the healthcare taxes is a good one (insuring uninsured children and low-income adults) it does nothing to help those stuck in the middle without insurance and businesses that will have to pay an additional tax if they have group health plans.

A recent poll conducted by the firm Davis, Hibbits and Midghall (DHM) noted that 45 percent of Oregonians believe that Oregon does not need more money to fund critical public services. If they spent the money they already have in a responsible and wise manner they could fund these important services without asking for tax increases during a recession noted the summary of the poll.
While most states in our country are trying to find ways to protect businesses and attract more employers, our Democratic led legislature has shamelessly approved tax policy that will put a stronghold on private sector jobs and our ability to recover quickly from the economic crisis. PHA


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