Tax Reform

Gross Receipts Tax Threatens Job Growth and Economic Opportunity in Oregon

The gross receipts tax is the epitome of bad tax policy.

Oregon citizens are currently debating a $5 billion tax hike proposal, the largest in state history. Initiative Petition 28 (IP 28) would institute a gross receipts tax for Oregon businesses. Under IP 28, businesses would be charged a 2.5 percent tax on all sales based in Oregon above $25 million. As a recent report from the nonpartisan Oregon Legislative Revenue Office (OLR) reveals, the gross receipts tax is a huge obstacle to economic opportunity.

This new gross receipts tax would only drag down Oregon’s already noncompetitive tax climate. For example, Oregon’s top marginal state and local corporate income tax is 11.25 percent, which is one of the highest nationally. The state’s heavy taxes is a key factor influencing Oregon’s poor economic outlook ranking of 41 out of 50 in the 2016 Rich States, Poor States ALEC-Laffer State Economic Competitiveness Index. Furthermore, not only must businesses pay the high corporate tax rate, but they also must pay the minimum tax on Oregon-based sales.

Not surprisingly, OLR found the gross receipts tax imposes a heavy financial burden for Oregon business. IP 28 would increase taxes by an estimated $5 billion per biennium. For example, the report predicts a company that has $70 million in sales would see their taxes soar by $1,105,001(from paying $50,000 to $1,155,001 in taxes). As businesses struggle to pay this heavy financial burden, OLR estimates a loss of 38,400 private sector jobs. Retail trade, wholesale trade and health services will face the most losses.

Furthermore, OLR also found that IP 28 will impact Oregon families. Businesses do not pay taxes – people do. While businesses collect and remit taxes, the burden of taxes is always borne by the individual at some level.  In this case, consumers would see prices rise by 1 percent. Additionally, OLR estimates that IP 28 would increase Oregon’s per capita state and local tax burden by approximately $600. Overall, after-tax household income would decrease for all groups, but households making less than $48,000 would see their income fall the most. As ALEC research has noted in the past, the gross receipts tax is the epitome of bad tax policy.

The nonpartisan Oregon Legislative Revenue Office’s report reveals that Oregon families and businesses cannot afford a $5 billion tax hike. Instead of instituting another tax on job creators, Oregon policymakers should focus on what works. Research shows competitive tax rates, along with responsible spending, can create a vibrant economic environment. Oregon families deserve economic policies that increase opportunity and reward entrepreneurship.

In Depth: Tax Reform

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish. A…

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