In January, Oregon is going to vote on Measure 67. Measure 67 is a petition referendum on House Bill 3405 which is an overhaul of the corporate tax structure. To win, the democrats in Salem are counting on your frustration. They believe that it is easy for voters to raise taxes on “someone else”. It is tough for a lot of Oregon Families right now. The idea that “someone else” isn’t paying their fair share is frustrating. But as voters, we can’t fall into this trap. The January election is going to bring us to a fork in the road. We need to look past our frustrations, and chose the right path for Oregon. Oregonians are in this together. So, lets go through what Measure 67 means to your households and businesses.

Measure 67 is poor policy.

I want to evaluate Measure 67 as policy. For people less conservative than me, its going to require a leap of faith. When I say Measure 67 is bad, that doesn’t mean schools are bad. It just means that the state legislature turned in poor quality work.

• Gross Receipts vs. Income Tax: Measure 67 is two taxes even though businesses only have to pay one. Businesses will need to calculate both taxes, and pay whichever is higher. The first is an income tax. Companies will pay income taxes on profits. They can also reduce their income tax though tax credits that the state offers. The second is a tax on gross receipts. Gross receipts are a businesses total sales for the year. A corporation cannot use tax credits or expenses to reduce this tax.The problem is that the tax is complicated. If you do business in Oregon, it needs to be clear how you’re going to be taxed and what you are going to be taxed on. Good tax code allows business to plan for their tax burden. Businesses can’t plan for their tax burden because they won’t know what tax they are paying prior to the end of the year.
• It makes Oregon an untrustworthy partner: The state uses tax credits and breaks to promote behaviors within the business community. Tax credits can be used for anything from to offset cleaner technology to actually attracting new business. Under Measure 67, you can’t use tax credits to offset the gross receipts tax since the credits are written for income taxes. So on one hand, Oregon is telling businesses that they will receive benefits for doing a stated activity. On the other, Oregon is telling businesses that they can’t have the promised benefit. The state government can’t grow the economy by being hypocritical.
• It ignores the larger issue: Measure 67 is a response to the current economic crises. It gets us by today, but what are we going to do tomorrow. Currently, state services are unsustainable because the budget grows at 9% a year which is faster than the 3% average annual growth rate for the rest of the economy. Just to illustrate this, assume the state could raise taxes every year to balance the budget. To fund the state government, you would need to give the state 6% more money every year. Basically, you will give up more than any raise you’re going to receive. Every year you will be worse off than the previous year. We need leaders in Salem that won’t ignore the 500 lb gorilla in the room.

Will Measure 67 kill jobs?

Oregonians need to understand the impact of Measure 67 on the economy when they vote in January. Currently, Oregon’s unemployment rate is 11.5%. Most economists don’t see the job picture getting better until late 2010. Measure 67 is going to cost private sector jobs and hurt Oregon’s families by the following:

• Higher prices: Traditionally, sales taxes or gross receipts taxes are shared with the consumer. We may have convinced ourselves that these taxes will get paid by profits hidden away in the Caymans. It is not the reality. At least some of the money is going to get paid by Oregon families. For the record, the tax bill for Measure 67 is about $68 per Oregonian. If you add up the total new taxes and fees from this legislative session, it would be $435 per Oregonian. If you added in the new taxes and fees from the 2007 session, you would owe a total of $586 per Oregonian. Do you see the pattern? The point is all of these taxes will impact jobs, and I like my job.
• We’ve taken away the incentive to grow jobs: Under Measure 67, corporations could be better off not to grow their business. Most taxes in the United States are percentages. If you make a dollar, then you owe Salem a quarter. The tax on gross receipts is a flat tax. As you go through this, keep in mind that revenue is not profit. Assume that I own a company that fell into the $ 50 million to $ 75 million gross sales category. My tax would be $50,000. If I have sales of $50 million, that is a gross tax rate of .1%. If I make $ 74, 999, 999 the tax rate is .06%. So, why are we charging different tax rates to companies in the same tax bracket? This seems unfair to me.Take the same company. Assume that they have the opportunity to add another $10,000 contract. If that account puts my company into the $75,000,000 and up a category, I would pay $15,000 in additional taxes. Basically, I could lose money by growing my company with profitable business.The point is simple. State policy should be pro-growth and pro-jobs. Oregonians, who are business owners, should always benefit from hard work. Measure 67 doesn’t allow them to do that.
• You could owe money even if you lose money: This reminds me of a dairy farmer that I met. I asked him if he liked farming. He told me it was the only business that he ran where he could generate $500,000 in revenue and lose money. Of course, he loved farming. The point is that gross sales aren’t a sign of profitability. We should always tax profit, not revenue.

Conclusion

As a state, it is time to evaluate the quality of work the legislature has sent us. Is it going to cost jobs? Does it make schools more secure in the long run? Does it address the out-of-control spending in Salem? Does it build a state that is prosperous to live in? My opinion is Measure 67 is an example of poor leadership and policy making. We need to send it back to Salem, and ask them to do the job right the second time.