Editorial: Measure 97 no solution to state’s fiscal woes

Editor’s note: Over the next several weeks we plan to address a variety of election issues. We’re not the first to note that this year’s elections are unusual. We have a presidential election with prominent candidates whom few are excited about. We have a governor’s race and other state contests that certainly deserve the serious attention of voters. We have the usual bevy of measures – seven, this year – which we will summarize and analyze for our readers. One in particular, Measure 97, we believe, deserves scrutiny by itself. That will be our topic today.

The voter registration deadline is Oct. 18. Mailing of ballots to local voters begins Oct. 19. Ballots must be returned by Nov. 8.

Measure 97 is a proposal to raise corporate taxes on businesses with annual sales that exceed $25 million. This initiative has gotten a lot of press and the details are probably more familiar to most of us than most measures we will be voting on.

Here are the basics: Measure 97 would increase taxes on C-corporation businesses, which are those that pay their own taxes, by removing an existing tax cap on such businesses. Annual sales that do not exceed $25 million will continue to be taxed at 0.1 percent, but the measure would establish a 2.5 percent tax on corporate gross sales – not just profits – that exceed $25 million. The measure would not affect business entity types such as S-corps., partnerships and proprietorships.

The measure does exempt “benefit companies” – those whose purpose is to provide environmental or social benefits.

The measure specifies that revenue from the tax would go to early childhood education, K-12 education, health care and services for seniors.

Support for this measure is largely split down party lines; it’s favored by many of the Democratic leaders in state government including Gov. Kate Brown and Labor Commissioner Brad Avakian, who’s running for secretary of state. Rep. Phil Barnhart, D-Eugene, whose 11th District includes most of southern Linn County, including the Holley and Crawfordsville areas, is another proponent.

Those in opposition include Republican leaders and Dr. Bud Pierce, Brown’s chief opponent in the gubernatorial race.

An analysis by the Oregon State Legislative Revenue Office last May states that companies with sales of over $200 million a year could end up paying triple the tax they do currently and that 85 percent of the direct impact of the measure would fall on 274 corporations.

If approved by voters, the new tax would generate an estimated $548 million through 2017, then about $6 billion per legislative biennium after that.

What hits closer to home for most of us is the OSLRO’s finding that the trickle-down effect from the tax increase would cost $600 per year, on average, for every man, woman and child in Oregon. No, we wouldn’t pay it as a line item on our sales receipt, but the costs of doing business by manufacturers will surely be passed down to us in the form of higher prices. Opponents argue that it’s a regressive tax in the sense that it’s going to affect lower-income families more than the upper crust.

Essentially, they say. this makes it the biggest tax increase in history, about 25 percent, according to the OSLRO.

Even though proponents call this a tax on Big Business, it is essentially a consumption tax – a sales tax.

The OSLRO’s analysis also predicts that the effects would dampen income, employment and population growth over the next five years.

More specific details are widely available with a simple Google search.

Supporters say almost $2 billion is needed to fund schools and that large and out-of-state corporations should pay their fair share to help Oregon government provide the services citizens want and need.

While schools and the other segments of society mentioned above certainly have needs, the question is whether those needs exceed Oregon citizens’ need for that $50 per month. Even in today’s world, $50 is a fairly significant sum. You can take a family of four to dinner at a fast food joint for that. That’s four dinners per month for that family.

Is it better for the government to spend that $600 a year for each child in a family or should it continue to be up to parents to determine how to disburse that money?

These are the kinds of questions voters need to ask themselves.

Oregon spends roughly $10,000 a year on each of its public school students. This isn’t the place to argue about school spending, but voters need to ask themselves whether sticking it to the corporations that provide jobs to our state is the way to go here. Right now, Oregon is considered one of the better states to do business in, tax-wise, according to The Tax Foundation – because it does not have a sales tax. Otherwise, according to most rankings, such as Forbes or CNBC, it’s right about in the middle of the 50 states.

So what happens if we slap that sales tax – because that’s really what it is – on businesses? As noted already, the OSLRO, which should be as objective as anyone is capable of being in this fight, predicts a general slow-down as a result of this.

For all those people who’ve finally gotten jobs following the severe recession we’ve all experienced, for the municipalities and districts that are finally seeing tax revenue flowing again, for companies that have decided to expand, this is a bad deal.

Weren’t the revenue reforms of 2010’s Measures 66 and 67 sufficient to ensure that all Oregonians pay their “fair share” in taxes? Now, just six years later, we’re voting on yet another tax increase.

Are we confident that even if we pumped $3 billion a year into our students, our seniors, into healthcare, that those people would actually benefit substantially? No. The words “Cover Oregon” should tell us all we need to know. That debacle is illustrative of the lack of wisdom our state leaders have demonstrated in spending our tax dollars and we have no reason to be confident that if they suddenly get $6 billion more, that anything different will happen.

We know that our legislators are trying to do the right thing for Oregon, but we don’t think this is it.

We’re convinced that Oregon’s true need is economic growth – jobs. Jobs produce tax revenues for government services – the right way. Sticking it to companies, such as Entek, down the road in Lebanon, that are trying to compete against Asia, often on very thin margins, is not the way to keep them here.

When people work, as gubernatorial candidate Pierce has rightly said, repeatedly, on the campaign trail, their entire outlook brightens. People who have jobs pay taxes and the Legislature needs to follow the same formula the rest of us do in generating and spending income: wisely and carefully.

Proposition 97 is a faulty, unwise solution to our state’s problems.

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