This should be a key provision in the D's revenue plan. While other taxes could and should be looked at, changing the single sales factor has two unique aspects which make it almost immune to repeal by voters: first (and most importantly), it applies, by definition, to multi-state corporations; second, the details are far too complicated to reduce to a sound-bite campaign.

If the D's made the case that reverting to a three factor system was about making multi-state corporations pay their fair share to Oregon, it should be salable.

Hi Chuck,

Great post. When I looked into this a couple years ago, no other state had followed Oregon into adopting the single-sales factor apportionment. Is that still the case? It seems to me that we need to be competitive with other states, but not the low price leader, especially considering that our neighbors, Washington and California, are relatively high tax states for corporations.

What always bothers me about corporate minimum tax proposals is that the real problem is not that the corp minimum tax is so low, but that profitable companies are not paying more than the minimum becuase of tax breaks such as single-sales. It seems to me that we should come up with a fair system of corporate taxation so that companies of similar size and profitability have similar tax burdens.

One other thought - I think that the homebuilder's point was that it is not particularly fair for corporations that are losing money to have to pay taxes to the state, which is what the 0.15% gross receipts tax would do. On this, I tend to agree and the state ought to be taxing corporate profits (income - expenses) instead of revenues (sales), which is what the state corporate income tax is supposed to do (except that it is riddled with loopholes). Of course, the state of Washington has such a gross receipts tax levied on revenues, and it has a vibrant business community with many Fortune 500 corporations, but that doesn't mean that their approach is necessarily fairer or better than a corporate income tax. Indeed, Washington state has different, lower rates for high sales/low margin businesses like retailers to try to correct for this lack of fairness like you mentioned in your original post. I think the preferable way to go is just to have an income tax on corporate profits without all the loopholes.

I keep hearing that all the state agencies have cash reserves of more than $4.9 billion. As such, this seems like a billionaire using force to wrangle money out of a struggling business owner.

Many of the state's business associations have endorsed a modest increase in the corporate minimum tax, but they oppose the proposal released last week because, as Chuck and Brian have pointed out, a company's sales says little about its profits and this gross receipts tax could wind up being very unfair to many Oregon companies who are struggling to stay afloat, including many small businesses.

The legislature can absolutely come to an agreement on corporate minimum tax this year, but the proposal released last week is not the answer.

I guess the democrat brain trusts missed the fact that PROFITS are taxed. So if I do not make any money, I dont owe a business tax. This really is not that hard of an issue. You revenue whores are just lining up at the trough, regardless of any consequences to business. As you ALL already know, private businesses drive there profit to zero to reduce the tax burden, meaning the money goes into pockets and comes out as income tax.
Why cant you all come up with a system that encourages businesses to come to Oregon and HIRE FOLKS?!?! How about NO BUSINESS TAXES for companies that have 90% of their employees in the state? Or some kind of scale depending on if their HQ was here local? Or some creative ways to stimulate job growth? Oh yeah, business is evil and we dont want just any businesses here, just cool businesses that have lots of democrats and liberals and are only green and are on the global warming bandwagon? Yeah, you guessed, we are not getting any business relocating TO here, just oughtta here. Great strategy, who the hell is going to pay for all these PERS costs?? Am I the only one NOT working for the state? But hey, REVENUE is your crack cocaine, and it is perfectly fine that we all go broke for your precious budget. Can any of you at least ACT like you work for a living and have a clue about business? Holy crap ethel....

Say What said: I keep hearing that all the state agencies have cash reserves of more than $4.9 billion.

Brian: I don't know if this number is correct, but cash reserves does not mean an unrestricted savings account to spend on whatever the state wishes. For example, when Oregon universities collect tuition each quarter, a huge amount of cash enters state bank accounts, and those are considered "cash reserves." But the money must be spent on operating the universities, paying professors, instructors, graduate assistants, staff, administrators, etc. The state cannot simply take that money and use it for whatever it wants, and if it could and did, we would not have universities any more. The same is true with accounts like the unemployment insurance fund and bond sinking funds to pay off debt for capital construction (new state hospital, prisons, university construction, etc).

If I remember correctly, the amount in savings from the educational stability fund and the rainy day fund are less than $1b (someone correct me if I'm wrong) and the legislature will probably end up relying on those funds to balance the budget, at least in the second year of the biennium.

I don't know how Washington handles business taxes, but US New and World Reports just named the state as the best for business.

In addition to this, the OHBA is also lobbying Washington County to reduce or eliminate the transportation development tax that was voted on last year by the taxpayers. This tax was implemented as a charge to developers in order to fund transportation projects and improvements. In the most recent request, because the TDT is due to take effect on July 1, instead of trying to get it stayed altogether, they now want a 20% decrease in the tax.

"The same is true with accounts like the unemployment insurance fund and bond sinking funds to pay off debt for capital construction (new state hospital, prisons, university construction, etc)."

The Legislative Revenue and Legislative Fiscal experts were at our recent legislative town hall meeting and talked about all these funds.

Then a state senator who was working for the Governor during the 1980s recession told the story of the SAIF fund raid. In order to balance the budget during the early 1980s recession, money was raided from SAIF. The business owners who had paid that money to SAIF for insurance sued because they believed that was a wrong use of the money. They won the lawsuit, and the state had to pay back the funds with interest.

Here is a very helpful summary that was passed on to me by a friend.

Here is a very helpful summary that was passed on to me by a friend.

Trying to raise significant tax revenue from business activity by taxing net income is a fools game, as any first year CPA can assist virtually any business in legitimately reducing taxable net income to zero (or below). The exception is publicly held "C" corporations, which need to retain profits to distribute to shareholders as dividends, but even those corporations can use multi-state strategies to avoid or minimize tax liability in Oregon.

Washington has an industry-specific gross receipts tax known as the Business and Occupation (B and O) tax. The rate is extremely low, but it applies to every dollar of gross receipts generated by virtually every business activity and business organization in the state, even including certain business activities by nonprofit organizations. The B and O tax is an extremely effective method of generating revenue from business activities, and it is extremely difficult to avoid / evade, even with the best CPAs and tax advisers.

I can't see Oregon adopting a gross receipts tax in the current political environment regardless of the merits of such a system, but for those who wish to see "business" paying a greater percentage of Oregon taxes, I heartily recommend it.

I really don't see any problem with the existing $10 minimum tax. If the business shows a profit then the profits are taxed at the business rate. If the business shows a loss for the year then they still need to pay a minimum tax as a way to require everyone to file a return. I suppose the minimum could be $50 or even $100 rather than $10 but there isn't any point in making it much more than that. After all, why try to extract taxes from a business that lost money for the year?

On a somewhat related note, I manage my small business in a way to minimize taxes and I assume most everyone else does also. If I have profits on hand at the end of the year I make sure to spend them rather than leave them on the books. I'd rather buy a new piece of equipment that improves my business than give that money to the chumps in Salem. Once the chumps in Salem get the money they won't help me out so I need to look out for my business myself.

If someone really wanted to improve the climate for small businesses in the State then they should take a look at providing some sort of tax free savings account for business. If I had a way to save money without paying taxes on it then I would be able to save enough to buy larger pieces of equipment without needing to use debt. The current system forces me to spend the profits each year rather than save them.

So, why do you pander to the industry by using their realtor lingo? They are building houses, not homes. I speak 7 languages, have lived in 4 countries, and ONLY in America could an industry get no blow-back claiming they sell "homes".

Given that, I didn't read further. Do you deny that they subborn hobby breeding? Are the #1 source of air-born immune damaging aromatics? Use drug testing as a political litmus test?

Yeah, let's concentrate on their foot-dragging on $.15. Why don't you all just admit that 99% of what "occurs" to you all to write is what the Central Committee told you to get hepped up about. Parties suck.