During the next 12 months, we are going to see thousands of people lose their jobs in Oregon. It would be nice if some of those people could start their own businesses without worrying about a high corporate minimum or excessive licensing fees.

Personally, I think that raising the corporate minimum without regard to the size or revenue of the company is a bad idea.

Also, can someone please explain to me why the Governor's 2009-2011 budget recommends increasing the total funds budget for DAS from $1.1 billion in the last biennium to $2.6 billion in the current biennium?

Reading the budget for the department, I see that the cost increase is tied to an increase in the OEBB's authority to "pass-through insurance premiums on behalf of its members", but I don't know what exactly that means.

Carla - basing an increase on net corporate income is a bad idea. Many multi-state and multi-national corporations can juggle the books to avoid any tax increase here in Oregon. Also, any profit for S-corporations is already taxed as income for the business owner.

Also, in order to have a significant impact on the budget, you would need to have a significant increase in the corporate minimum. The last one that the legislature passed (and was rejected by voters) was something like $250 - $300.

That level of increase could be a significant barrier for entry for someone who has lost their job and wants to start a business here in Oregon.

A better idea is to tie the increase in the minimum to revene-generating transactions or gross revenue, the total number of employees, or some similar metric. That gets closer to what most progressives want -- to ensure that corporations operating in Oregon pay their fair share while not being punitive to small business start ups.

Given that pretty much all the State General Fund does is education, health care and public safety, you're going to have to define 'health care' pretty narrowly to say you're not cutting it. As Meghan said, this budget has to cut a lot of long-term care for seniors and people with disabilities.

If a family making $30,000 pays almost $800 in taxes to the state (our family a few years back), why can't a business making $50,000 a year pay more than $10?

I do think that changing it so the CMT varies according to business size would be good. A small corporation made up of a few consultants pooling their resources shouldn't be taxed at the same rate as, say, Intel or Nike.

Talk to me about why you think that's bad, Sal. This is the MINIMUM tax rate, not the total potential state tax, correct?

I've already said why I think it's a bad idea: We are going to have thousands of people lose their jobs in the next year. Some of those people will want to try and start their own businesses and I believe that our tax policy should reward that kind of behaviour.

A $300 minimum tax, particularly one that is coupled with an increased business license fee (which is usually part of the package for increasing the corporate minimum) will lead to fewer business opportunities for people at or near the bottom of the economic ladder.

Again, that problem could be solved by tying a proposed increase in the minimum tax to the size or revenue of the company. Such a tax structure would also likely be much more progressive.

Jenni - The folks to consider are not businesses earning $50,000 per year -- most of those are paying more than the corporate minimum anyway, either in terms of an actual tax on the profits of the corporation, or in the form of personal income tax, in the case of an S-Corp.

Also, Jenni, a corporation that makes $30,000 per year in profit will pay $1,980 in state taxes, not $800. A corporation making $50,000 per year in profit will pay $3300 in state taxes.

Jenni writes: If a family making $30,000 pays almost $800 in taxes to the state (our family a few years back), why can't a business making $50,000 a year pay more than $10?

That goes to the very heart of what we mean by a business or corporation. I am not necessarily endorsing this particular viewpoint, but I also think it is not without merit.

A "business" or "corporation" is simply an accounting entity. It is not the same thing as a person. The entity consists of employees and owners (including stockholders), all of whom make income and profit from the operation of the business.

Any revenue that is paid either to owners or to employees is taxed as regular income (employees) or regular income (dividends) or capital gains (stock gains).

Finally, as Sal points out, multistate corporations can shift around income so as to have it appear in the state (or country) with the lowest corporate tax rate.

Most liberal economists I know do recommend a minimum level corporate tax rate (see the Hamilton Project link I referenced in an earlier thread) but also require changes to accounting rules. Most also acknowledge that we are in a race to the bottom for corporate taxes, and it is quite possible that in the medium future we won't have corporate taxes, only individual taxes.

If true, where we need to focus our efforts is on bringing all income under a common tax rate, rather than providing preferential treatment to dividends and capital gains.

Any revenue that is paid either to owners or to employees is taxed as regular income (employees) or regular income (dividends) or capital gains (stock gains).

Not necessarily. At least, not when you're talking about a single state.

For example, a timber company. They own lots of land in Oregon and use large amounts of state resources (firefighters, roads, law enforcement). They might pay a few employees to cut some trees. If they export all those trees, they're making a lot of money outside of Oregon. If their owners live outside Oregon, they'll pay taxes on their profits outside Oregon.

So, you've got a company that makes a lot of money on its holdings in Oregon, uses lots of Oregon resources, and other than some small amounts in its employee's income taxes, pays virtuall nothing to Oregon.

Why shouldn't the state seek to recoup some of its investment in the infrastructure that makes that company profitable? (And yes, the company CAN shuffle things around various states to minimize its tax burden - but that's not an argument for the state giving up trying.)

Kari - You misunderstand my point if you believe that I advocate the state "just giving up" on revenue from multi-state corporations.

If your proposal is to just pass a blanket increase in the corporate minimum, then you are advocating for policy that continues to let large multi-state and multi-national companies get away virtually unscathed (what is $300 to Intel?) while laying a disproportionate amount of burden on Oregon-based S-corporations, and particularly on startups that were created by people trying to survive in a bad economy.

I see nothing progressive in that solution.

The solution I've suggested is one that was considered in the 2007 legislative session, which is to tie any increase in the minimum to revenue-generating transactions or gross revenue, the total number of employees, or some similar metric.

If you have a better suggestion, I am all ears.

I've already said why I think it's a bad idea: We are going to have thousands of people lose their jobs in the next year. Some of those people will want to try and start their own businesses and I believe that our tax policy should reward that kind of behaviour.

So is it your view that we eliminate the corporate minimum tax for these folks? If not, then what is appropriate? If so, then where is the threshold for minimum taxation?

No. I think they should keep it at $10 or some similarly low figure -- say no more than $25 or $30 (the state should be held harmless for any processing cost) -- and then index any serious increase to the size of the company, its revenue, financial transactions in Oregon, or some similar metric.

The policy goal I am after is to avoid creating a financial disincentive for people at the bottom of the economic ladder from starting a business in Oregon.

It's worth mentioning that the tax on an individual who earns an income that is below the taxable threshold is $0.