After Oregon: Business Groups Say No to New Taxes
By Don C. Brunell, President, Association of Washington Business
Facing a $2.6 billion deficit that could be growing — we’ll know more after next week’s revenue forecast —Democratic leaders in Olympia are looking over the state’s southern border for quick budget fixes. Like students taking a test, it’s tempting to steal a glimpse of the paper next to yours.
Unless, of course, you’re taking different tests.
Trying to apply Oregon’s tax scenarios in Oregon here in Washington simply won’t work because the two state’s tax structures are very different. Oregon is an income-property state while Washington relies upon sales, gross receipts and property taxes.
Put another way, Oregon’s citizens pay a higher share of state and local taxes than Washington according to measurements by the Washington Alliance for a Competitive Economy
In Washington, employers in the private sector account for more than half of the state and local tax collections whereas in Oregon businesses pay roughly 40 percent.
Lawmakers are well aware of the tax burden on business and over the years have tried to replace the B&O (gross receipts) tax with an income tax. Because income is treated as property in Washington and our state’s constitution requires that property should be assessed and taxed uniformly, replacing the B&O with an income tax requires a vote of the people. The results from those elections consistently show that a third of the voters support an income tax.
So what about the most recent special election in Oregon on Measures 66 and 67? Lawmakers need to look at the aftermath of the vote in Oregon and ask themselves two questions:
- Would a major tax increase douse our economic recovery and cause more jobs losses?; and
- Would a major increase in the sales, B&O or property tax pass muster with the voters if challenged?
The fallout from the two Oregon measures is just beginning. Measure 67 does more than just increase the corporate minimum tax from $10 annually to a sliding scale starting at $150 for companies with less than $500,000 in sales, up to $100,000 for companies with $100 million or more in sales. It also enforces the ghastly provision of making the tax retroactive, extending back to Jan. 31, 2009.
As The Columbian rightly editorialized, CEOs may think twice about 2009: “CEO: Oops! I guess last year wasn’t as profitable as I thought! To which Clark County economic development officials respond: ‘C’mon over!’”
As for Measure 66, it increases state income taxes for individuals making more than $125,000 per year or families making more than $250,000. If that sounds like a minor hit on the rich, be advised that most businesses are led by people making more than $125,000. Again, The Columbian wrote: “Furthermore, many of those leaders live in Clark County, and they’re sick of having to pay state income tax in Oregon. Combine those dual insults, and it makes even more sense to move a business across the river.”
Our state’s economy is fragile and our unemployment rate is too high — hovering short of 10 percent statewide and nearly 12 percent in Southwest Washington. Employers in Washington already were hit with two tax increases this year—unemployment insurance and workers’ compensation.
Business owners have seen their unemployment taxes skyrocket — some by as much as 1,300 percent at the beginning of 2010. The state Dept. of Labor and Industries also hit business with an average 7.6 percent increase in workers’ compensation premiums earlier this month and the governor and controlling Democrats tell employers reforming workers’ comp is “off the table” this session.
Washington has the unique opportunity to learn from Oregon’s losses and use them to bolster its recovery. Not only do Washington and Oregon have vastly different tax systems, but they are in a much different place on economic recovery. We need to keep that advantage by looking at Measures 66 and 67 as obstacles to recovery. Let’s be wise and make good on our offer to frustrated Oregon businesses to “C’mon over!”
[Publisher's Note: Olympia Newswire invited the WA State Labor Council to submit an op-ed on the "After Oregon" theme to complement the AWB's op-ed, but without success]
Comments
By Richard on February 5th, 2010 at 3:34 pm
I grew up in Oregon and am saddened that the voters, like Hansel and Gretel were conned into thinking that the candy was free, and now they are selling their souls for some sweet handouts. And if, as Washington is so willing to encourage, businesses move out of the state. . . (which is a foregone conclusion for at least a few) then it will even further erode the states potential for recovery. Which will be spun into positive sound bites, like: “Hurray, we did it, smaller class sizes (Many families left to find work elsewhere)”.
I would like to see things happen differently. Luckily, the backbone of the recovery (business owners) can simply opt out of the tax, while continuing to live, work, employ, invest, and enjoy Oregon.
Hopefully enough choose that option over surrender or retreat. It certainly sounds like quiting business and just getting a job in the public sector is where everyone is encouraged to go, so some business owners may opt for that, while others not willing to debase themselves that far, would simply pick up and move. At some point, you realize the neighbors don’t like you, and you get tired of wasting your time being helpful and generous.
So, the wealth tax exemption is the best option. I hope, enough Oregon Business Owners find out about it.