Oregon Passage of Taxes on Business and High Income Earners (Portland: lease, how much)
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I am probably going to either go out of business by the need to compete with a tax burden that no one else has, or I end up selling less, which means my employees get laid off, or I give up and either move to another state, or can all my employees and outsource to China.
Is that a possible outcome?
Well not everything can be outsourced to China. Grocery stores are high revenue, low profit businesses. Clearly that won't be outsourced to China, or moved to another place. They will raise prices, or for some companies that have donated to charities in the past won't be able donate to charitable organizations as they pay the minimum tax instead. I'm not sure anyone thought about all of the non-profits that rely on business donations.
Well not everything can be outsourced to China. Grocery stores are high revenue, low profit businesses. Clearly that won't be outsourced to China, or moved to another place. They will raise prices, or for some companies that have donated to charities in the past won't be able donate to charitable organizations as they pay the minimum tax instead. I'm not sure anyone thought about all of the non-profits that rely on business donations.
True about grocery stores, and probably there are other business types that fit into that category. As for the smaller manufacturers of which I was thinking, they are more likely to outsource to say Idaho or another state, than to China.
Good point about business donations, and it hadn't even occurred to me. Probably lots of unintended consequences with this.
Last edited by sugarsugar; 02-07-2010 at 09:39 AM..
or for some companies that have donated to charities in the past won't be able donate to charitable organizations as they pay the minimum tax instead. I'm not sure anyone thought about all of the non-profits that rely on business donations.
Actually, increasing the individual tax rate on the highest earnings will likely have the largest impact to further reduce charitable donations. The highest earners contribute the overwhelming majority of charitable donations in this country and with the state stealing a few more % of their incomes, you can expect those donations to go down even more than they have already fallen in this recession (which is a lot).
Actually, increasing the individual tax rate on the highest earnings will likely have the largest impact to further reduce charitable donations. The highest earners contribute the overwhelming majority of charitable donations in this country and with the state stealing a few more % of their incomes, you can expect those donations to go down even more than they have already fallen in this recession (which is a lot).
I agree that will impact donations as well. I have many friends that work for non-profits and donations are way down. I wouldn't be surprised to see some charities fold.
I apologize - I meant gross revenue, but my old mind had a long day today.
So, in my example, I own a company that produces Happy Widgets. I employ local people in Oregon to make the HWs in my smaller town, which require skilled people to run precision machines, which are heavy on maint./repair costs, and my insurance liability is high. If I project that my gross revenumes for 2010 will be 2 million, that after expenses I can pay myself $75,000, but the tax due will exceed my take home, then I need to pass the cost of the new gross revenue tax on to my customers.
However, now my HWs cost more than my competitors' HWs, and with the ease of internet sales, people are more likely to buy HWs from cheaper sources across the U.S., than mine which now cost more to buy because of this local state tax issue. And for competing companies that are large enough and have no concern about employing locals, they already outsource their HW manufacture to China, where their employees cost a buck an hour or less.
I am probably going to either go out of business by the need to compete with a tax burden that no one else has, or I end up selling less, which means my employees get laid off, or I give up and either move to another state, or can all my employees and outsource to China.
Is that a possible outcome?
Quite simply, yes, this a possible outcome. All you have to do is look at homebuilders or car dealers. These are local businesses who are now experiencing massive net losses and are barely holding on. They will now be forced to pay as much as $100,000 in additional taxes which will best case result in layoffs so they can pay it and worse case perhaps be the final straw for their business future. That is not exaggeration, it is simple fact.
This one element of the bill was horrifc. The rest of the bill, like increasing the minimum tax from $50 or $150, nobody cares about that. Even upping the individual income tax rate on high earners can be lived with. It is the REVENUE tax that is a crushing blow to local business and all too few people really understood that piece of it. The State Employee Union advertising on TV was incredibly misleading on these facts and it is really unfortunate.
"well, my brother owns a plumbing business in Eugene and he told me today he is moving to Idaho because of this tax hike. if he employs the same number there that he employs now it will be 5 more plumbers in Idaho with work."
If there WERE any work to be done in Idaho. Fact is, their unemployment is just about like Oregon's, and no one is moving to Idaho. Net migration last year was about 1000 people.
Totally forgot about car dealers... and it's no secret that many cars are going for a loss just to clear them out.
Talk about adding insult to injury... the Gross Receipts Tax is due irregardless of profit... so just selling a new Chrysler at a loss is now compounded by the tax
Why does Intel, Nike, Tektronix or any of the many, many buisiness concerns stay in Oregon?
Will Intel pull out of Oregon over this tax increase? - not likely.
However will Intel and others choose more favorable business climates when they need to expand - absolutely! This is already happening and will accelerate.
These large corporations look at 4 factors when choosing where to expand.
1. Infrastructure - Oregon probably get's a B.
2. Educated workforce - I'd guess we get a C in this area
3. Cost of doing business - I think we were a B and just dropped to a C-. (remember these companies aren't limited to the US)
4. Business friendly political environment - There's no doubt we get a D here and that's being very generous.
I think we should focus on policy which expands business and jobs vs. second guessing who'll leave next. With a vibrant economy the tax revenue will follow. With a stagnant economy, tax revenue will always be a struggle and our politicians don't have the intelligence and/or discipline to spend wisely.
Intel alone probably outearns all other corporations in Oregon combined. Including Nike. Intel has three campuses in Hillsboro, OR. What is wrong with this picture? How can corporations be making billions of dollars in revenue using resources obtained from Oregon and yet even in the cities where those entities do their thing there is widespread need and a struggling to provide essential services. I realize most of the handwringing is about 'small businesses' but all of these corporate monoliths were once small businesses. There is nowhere else in the world where business principals take so much out of the revenue stream for themselves as America. Well... maybe there are but they are not admirable places and it is clear America's model going forward is a Third World model. You may as well get used to it: 12% unemployment is here to stay. Regardless of whatever a 1.8% increase in tax burden will not fundamentally alter the downward trajectory of job creation in Oregon. In fact a 1.8% tax break would not fundamentally alter the downward trajectory of job creation in Oregon. Outsourcing, the use of illicit labor and creative accounting save percents of revenue, 10% or more. To be worthwhile incentive business taxes would have to be eliminated altogether. Even then I think some businesses would stick with the tried and true offshore manufacturing until the real source of their problem: labor costs, is addressed. A $3.00/hr minimum wage would turn Oregon's economy around post haste. Why did none of you bang your heads when the minimum wage was raised? That probably has more of a chilling effect of hiring. The reason, I think, is because those who need to can get around minimum wage laws and they can very well get around a pesky 1.8% tax hike as well. Tax them. Tax everybody. I've got no problem with paying taxes if I see decent infrastructure, clean water, air, etc. Make it progressive though. A tax booklet need not be 52 pages and taxes need not require specialists to prepare. That smacks of racket and opportunity for abuse.
Intel alone probably outearns all other corporations in Oregon combined. Including Nike. Intel has three campuses in Hillsboro, OR. What is wrong with this picture? How can corporations be making billions of dollars in revenue using resources obtained from Oregon and yet even in the cities where those entities do their thing there is widespread need and a struggling to provide essential services. I realize most of the handwringing is about 'small businesses' but all of these corporate monoliths were once small businesses. There is nowhere else in the world where business principals take so much out of the revenue stream for themselves as America. Well... maybe there are but they are not admirable places and it is clear America's model going forward is a Third World model. You may as well get used to it: 12% unemployment is here to stay. Regardless of whatever a 1.8% increase in tax burden will not fundamentally alter the downward trajectory of job creation in Oregon. In fact a 1.8% tax break would not fundamentally alter the downward trajectory of job creation in Oregon. Outsourcing, the use of illicit labor and creative accounting save percents of revenue, 10% or more. To be worthwhile incentive business taxes would have to be eliminated altogether. Even then I think some businesses would stick with the tried and true offshore manufacturing until the real source of their problem: labor costs, is addressed. A $3.00/hr minimum wage would turn Oregon's economy around post haste. Why did none of you bang your heads when the minimum wage was raised? That probably has more of a chilling effect of hiring. The reason, I think, is because those who need to can get around minimum wage laws and they can very well get around a pesky 1.8% tax hike as well. Tax them. Tax everybody. I've got no problem with paying taxes if I see decent infrastructure, clean water, air, etc. Make it progressive though. A tax booklet need not be 52 pages and taxes need not require specialists to prepare. That smacks of racket and opportunity for abuse.
H
Seems like only yesterday... no one I knew was out of work or lost their job... unemployment was at record lows and my tiny 401k was growing nicely... Whats changed in the last 18 months and more over... what can we do to change it back?
Taxes for specifics always do better... few complain of the fuel tax if it goes to roads or complain of taxes that directly support emergency services... most have a problem paying into a black hole that can never be filled.
Part of the problem is many really don't pay any appreciable taxes because Oregon has no sales tax...
I agree, it's a real problem when you need a CPA or Tax Lawyer to make sense of the Tax Code.
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