We pay, because the corporations don't.
Jeff Alworth
There are only so many revenue sources to fund a state budget: sales tax, income tax, property tax, and fees. The more of these sources you remove, the greater the burden on the others. Since Oregon doesn't have a sales tax, our income taxes are relatively large. 
But, in the last 20-odd years, the amount of the budget funded by corporations has shrunk by more than half. That means individuals have had to pick up the slack. And guess what? The Oregon GOP thinks that's just the way it ought to remain:
But the next 10 days could prove decisive because raising the corporate minimum has lost traction in the face of competing priorities, Republican opposition to taxes and an updated revenue forecast that will buy more public services in the next two years without tax increases.
Although Democrats have a bicameral majority in Salem, they still need a little help from the GOP to get revenue bills passed--it takes a three-fifths majority to raise taxes. But this is a no-brainer, right? Surely no one seriously thinks ten bucks is an adequate tax?
Corporations in Oregon pay less of the load than they used to -- about 5 percent of the general fund, compared with 11 percent during the 1980s. Most households pay far more in state taxes than the $10 paid by nearly 23,000 Oregon corporations, including 26 with Oregon profits of more than $1 million each.
Other states don't fund public services this way: According to a 2006 study by the business-backed Council on State Taxation, no state in the country asks business to shoulder a lower share of its state budget than Oregon does.
It's no surprise this nominal fee pays less and less of the services it was designed to fund. After all, it hasn't been raised in 76 years. Inflation alone would bring that ten dollars (assessed during the depression) to $117 in 2006 dollars. The current tax is a joke (though the punchline's not so funny).
So why is a tax hike everyone supports dying on the vine? Apparently it's part of the GOP's ideological mania against raising taxes, any taxes, no matter how rational or fair. Even if it means taxes on families are driven up.
It would be an outrage if the GOP managed to block this without at least going on record--so I hope the Dems put it to a vote. If raising these taxes is so horribly vile, surely GOP legislators will be proud to have their votes on the record.
Right?
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2:46 p.m.
May 23, '07
Raising the corporate minimum on small s-corps is bad public policy. Many Oregon residents who started their own businesses in the early part of the decade did so as a result of massive layoffs, and a $100 increase in the corporate minimum would hit such people pretty hard.
Having said that, David Edwards' idea to index the corporate minimum to the number of employees has merit, and should be pursued, but not at the expense of S-corps with fewer than 2 employees.
2:52 p.m.
May 23, '07
Right, and of course, the only taxes that an S-Corp pays directly is the minimum --- since all the income passes through to the individual owners, who pay at the personal rate.
I definitely like the idea of indexing to the number of employees, since there are some giant S-Corps out there (like Jeld-Wen, I think?)
2:55 p.m.
May 23, '07
Y'know, Charlie's gonna be mad at you for putting a picture of Alexander Hamilton on this post.... Man, that old family feud just won't go away.
3:06 p.m.
May 23, '07
Is Charlie related to Aaron? Wow. But hey, take it up with the US mint--I just reproduce their bills.
Yeah, there are a number of ways to raise the minimum that would exempt small corporations, but the GOP isn't going to be hot on any of them. And that's just the point. They're not standing on the fine pure edifice of a public policy argument--it's politics.
May 23, '07
Actually, corporations never really pay taxes. Their customers do. You may believe that's a good thing and it's an issue worthy of discussion because it can resulting in spreading the tax base outside Oregon, but it's truly another discussion.
May 23, '07
Actually Brent, in a free market corporations would be forced to eat the taxes. The market would set the price and Oregon corporations would be unable to pass their additional costs along.
Also, $100 is simply too trivial to appear in the pricing calculations of any truly viable corporation.
May 23, '07
I'm no tax guru but I am impressed with how this is framed regarding the GOP -- well done. When you look at it that way - that familiies are paying for what corporations don't - then that puts them in a tough spot.
5:10 p.m.
May 23, '07
Yup, in 2004 Howard Dean used to point out that Bush's tax cuts meant cuts in federal payments to states -- which meant that state taxes were going up.
May 23, '07
Brent is mostly correct but didn't provide a complete analysis. Corporations cannot bear the ultimate burden of any tax. Corporations are legal fictions. All taxes are ultimately paid by real people, either as consumers through higher prices, as employees through lower wages or fewer jobs, or as owners (stock holders) through reduced profits. It's an economic fact and not subject to argument. It's easy to say "raise the tax on corporations" because it allows us to pretend that those taxes aren't ultimately paid by us, but they are. Businesses don't have some magic pot of money out of which they pay taxes. In the interest of full disclosure, I work for the organization - the Council On State Taxation - that the original article cites as justification for an increase in the corporate minimum tax.
May 23, '07
Sorry, Joseph. In this case, corporations can bear the ultimate buden of this tax. $100 is simply too trivial for any truly viable corporation to notice.
What you are talking about applies to meaningful tax increases, not taxes that fall into the "nickel and dime" category.
May 23, '07
Alworth's argument is really silly and divisive, Joseph Crosby nailed it:
"All taxes are ultimately paid by real people, either as consumers through higher prices, as employees through lower wages or fewer jobs, or as owners (stock holders) through reduced profits."
It's divisive to generalize and apply perspective dependent value labels (consumers, employees, owners) -- taxpayers are all people.
An increase in the "corporate minimum tax" without a corresponding decrease in some other tax is an overall increase. Alworth and others should be ashamed to propose such when our state has over a billion dollars more than it had previously estimated.
May 23, '07
"Taxes are ultimately paid by real people" is kind of like saying "someday we all die." There is a certainty, but for most of us not an immediacy. Since corporation only pay out about 1% of their capital in taxable dividends per year, "real people" might not have the opportunity to pay the taxes for decades. In the meantime corporations continue to consume government services and demand government subsidies.
May 23, '07
JohnH - Your analogy is entirely inaccurate. All monies that corporations pay in taxes today are passed on to real people today. It's an economic fact. You may think corporations are the equivalent of the tooth fairy for state governments, but all parents know where the money under the pillow really comes from. Corporations do not maintain a magic pot of money out of which they pay taxes.
7:46 p.m.
May 23, '07
Corporations are legal fictions. All taxes are ultimately paid by real people, either as consumers through higher prices, as employees through lower wages or fewer jobs, or as owners (stock holders) through reduced profits. It's an economic fact and not subject to argument. It's easy to say "raise the tax on corporations" because it allows us to pretend that those taxes aren't ultimately paid by us, but they are.
There is almost no demonstrable relationship between corporate taxes and worker wages, and the ability of businesses to transfer increased operating expenses to consumers is dependent on the elasticity of the market for the product or service being sold.
What remains is that increases in profit are largely being captured as increased earnings by shareholders.
One of the most significant outcomes of reducing taxes on corporations is an increase in the concentration of wealth, since 60 percent of all stock is owned by less than 1 percent of the population, and roughly 40 percent of all stock held by Americans is held by America's 350,000 wealthiest households.
A more egalitarian distribution of corporate taxes ultimately leads to a more egalitarian distribution of social costs and wealth.
Indexing a corporate tax to the number of employees is a much more accurate reflection of the social impact that businesses have on public infrastructure than the current $10 minimum.
May 23, '07
Sal Peralta said, "A more egalitarian distribution of corporate taxes ultimately leads to a more egalitarian distribution of social costs and wealth."
ROTFLMAO
8:17 p.m.
May 23, '07
Why should corporations be more important than people? Yes, they're made up of people. However, we're talking about budgets often times in the millions, if not billions, of dollars. Often times their profit alone is close to, or more than, a billion dollars.
Asking these corporations to pay $100 more on their taxes is less than pennies to them. Their counterparts in other areas of the country pay a lot more than $100.
If a family whose income is well below the median, average, etc. incomes from the state can pay more than $10 (even more than $100), these corporations should definitely be paying more.
Even if these increases are passed along to stockholders, customers, etc., you're literally talking about much, much less than a penny per person.
We're not talking about tax increases of even thousands of dollars per corporation (although it would be nice if they were more on par to where they should be). If we just adjust for inflation, that would be just over $110. Which is more than 10 times what they're paying now.
May 23, '07
Dems like to deride Libertarians, but if you read the Declaration of Independence and Constitution you will see that there shouldn't be any personal income tax, only corporate taxes.
May 23, '07
Sorry, Joseph. I guess you have never worked for large successful companies that have found ways to squirrel away massive amounts of assets and reserves hidden from shareholders and employees, and protected by tax laws from the revenue agents.
The Council On State Taxation and the companies that underwrite it want us to believe that corporations consist simply of transparent flows of cash: any cost increase must necessarily be passed on. Over the very long term, this may be true, but in the short and medium term, companies have much more ability to juggle accounts and profit margins than you admit.
If companies in fact behaved like mutual funds, REITs, and Master Limited Partnerships, who all must distribute profits as they are earned, then you could theoretically justify a case where people not businesses would be responsible for paying taxes. Until then, the only way to tax the massive amounts of undistributed shareholder income is to tax the corporation.
10:35 p.m.
May 23, '07
Joseph Crosby wrote, "All monies that corporations pay in taxes today are passed on to real people today."
Oh, that's such a glorious little right-wing chestnut of conventional "wisdom".
If corporations really just pass along their taxes to regular individuals... if they merely jack up their prices in order to maintain their profits at the same level as before... then why do they oppose them?
If a corporation's profits are really independent of their taxes, then why would they care how they're taxed?
The only plausible explanation for why a corporation would oppose higher taxes is that it eats into their profits, right? And if that's the case, then they're not really passing along all the taxes to their customers!
You really can't have your cake and eat it too.
May 24, '07
Since I own an S-Corp I am probably qualified to state that $100 corp minimum isn't much more of a nuisance than the $10. I say this as a profit making joke of a corp. My weekly workman's comp costs on my least costly employee exceed that amount, my business liability ins. costs per week exceed that amount, and now my gasoline bill exceeds it each week, an added $90 couldn't be less of an issue. Do the Republikans really think $10 even covers the cost of Corporate Registry?
The "anti" argument couldn't be much more ludicrous and ideologically driven.
8:39 a.m.
May 24, '07
The sad part of all of this is the Dem leadership's concession of small biz to the Club for Growth guys.
Some of the proposals floated would have taxed every C-Corp in the state with a mid four figure minimum; whether they gross $1M or $1B. House leadership figured early on that adjusting for inflation, a number of around $200 would be good for the bottom end with a stepped ramp up to $5000 (or more?) for the bigger kidz. There were plenty of small biz owners who are independents and Republicans that could see the fairness of that type of scale.
The point would be to keep the minimum in the "pocket change" category regardless of company size.
Yet when it all started shaking out in the papers, Wayne Scott and Ted Ferrioli walked off with all of the "We saved small business again" marbles.
The Republicans get the PR win, even though they have pretty much flatly stated that any tax hike of any kind will be opposed by the Repubs as a block thus keeping the possibility of a 3/5ths majority beyond reach.
If the Guv and the Leg had gotten in front of this thing five months back, gotten small biz on board to market it, we might have been able to gain some advantage for the state revenue and for the political fight.
Those of us that saw this coming, were trying to work this logic, but were ignored until the 11th hour. We could have had a wedge here, but we seem to have pissed it away.
They're trying to backfill it now but it's almost too late unless they extend the session......
9:18 a.m.
May 24, '07
While Geoff Lundt is working hard to qualify as troll, there is this:
An increase in the "corporate minimum tax" without a corresponding decrease in some other tax is an overall increase. Alworth and others should be ashamed to propose such when our state has over a billion dollars more than it had previously estimated.
There are three issues here, and two are offered as fig leaves to cover the sins of the first. My assertion that individuals are picking up more of the load because we're taxing corporations at a lower level goes undisputed. That's issue one. Issue two is whether we ought to keep spending flat and shift the tax savings back to individuals or use it to fund services. A good discussion to have, and obviously, I favor the latter.
The final issue is the state of the current budget, which Geoff tries to inflate by means of "estimate" chicanery. The truth is that, by virtue of the kicker law, the state budget is incredibly unstable. The state must estimate what it will look like in two years (surely a businessman like Geoff would tell you what a fool's errand that is). We don't have "over a billion more" dollars. We are finally going through a period of health. Given the structural instability of the state budget, that means it's growing more rapidly than we predicted in '05. So what? That has absolutely bupkis to do with the corporate tax, and Geoff knows it.
May 24, '07
For all the folks bemoaning the idea that raising the corporate minimum tax above $10 would place an undue burden on the "real people" who actually would pay for it (in wages, higher prices, etc.), the logical conclusion is that corporations should pay no taxes whatsoever. That will reduce the undue burden placed on the real people paying for the taxes.
In my mind, this makes absolutely no sense. As long as we logically index based on number of employees, I'll bet raising the corporate minimum tax to $20, $100, or $1000 wouldn't be any more of burden than the current $10, but could (I assume) start moving the tax burden back towards a more fair balance between citizens and corporations.
May 24, '07
Actually a zero tax rate for corporations is a pretty good policy. You might have some issue with people shifting income but that can be solved. Another decent choice is to have corporate rates the same as individual rates and then you elminate the motivation to shift income.
I don't really understand why people get all wrapped up about this $10 minimum tax. BFD, why should a company pay any tax if they had a net loss for the year? Corporations have a 6% (or is it 6.6%?) tax rate in Oregon which seems just fine. If they make money then they pay their share to the State. If they don't make any money then there isn't any income taxes to pay. That is the nature of an income tax.
Most of the people on this thread just seem to have a nut job reflex that corporations are bad and therefore we must tax them. That is really a stupid way to create public policy.
11:19 a.m.
May 24, '07
Republicans have been trying to pull this crap all session long. They like to say that the current budget is 20% higher than last session. Well sheeeit, dudes, at one point we were DOWN 25% in revenues...so when are you guys going to come clean on the 5% decrease in this budget from when things were slightly more normal?
May 24, '07
Most of the people on this thread just seem to have a nut job reflex that corporations are bad and therefore we must tax them.
Actually Andy, it is more fair to say that since business interest, corporations, and partnerships use the state-provided infrastructure - roads, bridges, court system, water, sewer, airports, education, etc. - then they should pay their fair share.
And since Oregon ranks near dead-last in business taxes, one would think that Boeing, Microsoft, Amazon.com, and all the other Fortune 1000 companies from Washington would be beating a path to move to Oregon. But the truth of the matter is Washington has a much higher taxation rate than Oregon and invests those proceeds in the infrastructure services mentioned above.
And one final thought - if taxes really do hit the consumer directly, how come with all the tax breaks all the oil services companies have received in the last 6 years, the price and profit margin from a barrel of oil is at an all-time high? One would think that reduced taxes would mean reduced prices. But the truth of the matter is there is no direct relationship between pricing, profit, and taxation.
May 24, '07
Ignoring all the tired Libertarian crip-crap above...
I think the real issue is what would be both realistic and simple enough to put forth as a ballot initiative.
In other words, if the Repulbicans insist on such an idiotic knee-jerk rejection of ALL taxes that they refuse to reconsider the $10 Corporate tax, then get the voters to send them a message that we are tired of that kind of small-minded thinking.
Just think how wonderful it would be if the people of Oregon directly voted down one of the central tenets of the Republican leadership in Salem!
May 24, '07
Scott,
Business does pay their fair share. The business tax rate is 6% of their income so that seems plenty fair. The people who don't pay their fair share are the working poor. Most of them don't pay anything in income tax and they consume a lot of services. The people that pay the vast majority of the income taxes are the rich. The top 10% of them pay more than 50% of the income taxes.
May 24, '07
Andy:
Not to be rude, but all those numbers are bogus.
For example, the business tax rate is not 6%. You have that confused with the burden - Oregon businesses only pay a total of 6% of the total tax burden to the Oregon treasury (which is either 49th or 50th in the nation, depending on whose numbers you use).
The remaining numbers also need to be revised. Please do your homework next time.
12:15 p.m.
May 25, '07
The posts above are not "libertarian crip-crap." Regardless of his affiliations, Joseph's basic point is correct: a "corporation" is not some anthropomorphized entity that can "hide" money somewhere. It is a legal creation that has publicly available balance sheets, stockholders (if publicly traded), boards of directors, employees, and customers.
Too many of the posters above, besides Sal (who I think crafts an ingenious argument as to why corporate taxes may lead to more equitable distributions of income) miss this point.
Corporations are not all billion dollar enterprises. An individual can incorporate. Many of the small businesses that we all celebrate are "corporations". If "corporations" are squirreling away money, hidden from stockholders (that seems foolish, since they want to increase their stock value) and employees, then someone must know, right? The "corporation" doesn't act on its own--the board of directors or CFO/CEO or someone is doing this, right?
By the way, here is the link that some here may find interesting: Hamilton Project .
Look to the Clausing and Avi-Yonah paper. Kim essentially argues that, in an era of globalized commerce, it is becoming nearly impossible to alter the corporate tax rate without attending to other taxing entities. It is simply too easy for a multinational corporation, via legal bookeeping practices, to shift assets, costs, and profits around to the jurisdiction with the lowest tax rates.
Some economists of a liberal stripe are close to suggesting an end to a corporate tax altogether, although, importantly, accompanied by equitable treatment of personal income derived from dividends and investments.
2:10 p.m.
May 25, '07
This seems like as good a place to float this as any:
What if Oregon instituted a 5% sales tax...and exempted everyone who was registered to vote? Now that there's just one statewide database, you'd have a central check point. Anybody who was eligible to vote here--ie, a resident and purportedly a citizen--would be exempted through the use of an ID stripe with an anonymized voter ID #. All retail outlets get a stripe reader with their business license, and if you don't want one you can log all numbers on paper and send it in monthly instead.
Everybody else pays.
Five years ago there were plenty of places that didn't have card readers, now even tiny convenience marts in East Buttfolk take credit.
<h2>Throw darts--what's wrong with this?</h2>