Double Taxation of Smaller Businesses; Tax Breaks for Largest, Most Profitable Companies
Dr. Eric Fruits, chief economist at Economics International Corp. and adjunct professor of economics at Portland State University, issued the following statement regarding the latest draft of the legislature’s gross receipts tax on Oregon sales to be released tomorrow:
“The legislature’s latest proposal to tax Oregon sales would have three major impacts:
Shifting Corporate Tax Burdens to Small Businesses: Rather than being taxed once, many Oregon small business owners would now be taxed twice: First a new tax on their company sales, then a second time through their personal income taxes that they pay today. This proposal also deletes the small business income tax rate established by the 2013 Legislature, which is a third tax increase reducing the incomes of many Oregon small business owners.
Largest, Most Profitable Corporations Get Tax Cuts: The biggest businesses with the biggest profits could see tax cuts in the millions of dollars a year, while many small and mid-size Oregon businesses would see steep tax increases. This proposal eliminates the currently existing corporate income tax on C-corporations and establishes punitive taxes on companies that are already struggling, while giving tax breaks to profitable companies with a greater ability to pay.
Ultimately, Consumers Pay More: Any version of a tax on sales is built to be passed along to consumers in the form of higher prices for everything they buy. Essentially, it is a hidden sales tax that would be borne by Oregonians. The Legislative Revenue Office has confirmed this fact in all its analyses on gross receipts taxes conducted for the Joint Committee on Tax Reform.
For every $1 of tax cuts from eliminating the existing corporate tax system, the proposal’s tax on sales raises taxes by $2. Most of the increases will be paid by companies with low profits or no profits.
Consider two C-corporations with $5 million in sales, one business has zero or negative profits and the other has $1.25 million in profits (a 25 percent profit rate). The unprofitable business will pay $5,850 more in taxes under the proposal, while the profitable company will pay $75,150 less.”
Eric Fruits and Economics International Corp.
Eric Fruits, Ph.D. is president and chief economist at Economics International Corp., an Oregon based consulting firm specializing in economics, finance, and statistics. He is also an adjunct professor at Portland State University. His economic analysis has been widely cited and has been published in The Economist and the Wall Street Journal. Dr. Fruits has been invited to provide analysis to the Oregon legislature regarding the state’s tax and spending policies. His testimony regarding the economics of Oregon public employee pension reforms was heard by a special session of the Oregon Supreme Court.
Contact: Eric Fruits, 503-928-6635, firstname.lastname@example.org, www.econinternational.com