The Curious Math of Corporate Oregon

Chuck Sheketoff

Poster_Child_Bess_Wills_Gresham_Ford The Sunday Oregonian featured a story comparing two businesses and their different views of Measures 66 and 67. Paloma Clothing’s owner Mike Roach said he supports the measures. The other business owner, Bess Wills of Gresham Ford, said that the new minimum tax will cost the business $30,000 and might mean laying off a worker or raising the price of cars she sells.

Let’s examine the numbers behind Gresham Ford’s claim. Gresham Ford is the assumed business name of McRobert Motor Co., Inc. According to its filing with the Oregon Secretary of State, McRobert’s president is Sylvester Gonzales of Whittier, California, and Bess Wills, also listed at a California address, is the Secretary of the corporation. For the purpose of this post, I’ll just refer to the entity as Gresham Ford, the company’s preferred public name.

The Oregonian story doesn’t state so, but Wills’ claim that Gresham Ford will go from paying just a $10 a year corporate minimum tax to $30,000 under the new schedule presupposes that Gresham Ford is a C-corporation, rather than an S-corporation. Measure 67’s new minimum income tax sliding scale based on Oregon sales, modeled on a proposal the Oregon Business Association presented to the Legislature, applies only to C-corporations (see PDF chart explaining Measure 67).

Of course, unless Gresham Ford discloses its tax return, we don’t know for sure that the company is a C-corporation. That’s because whether a corporation is an S-corporation or a C-corporation is not a public record – it is an election made on federal tax returns that’s recognized under Oregon law. If Gresham Ford has been paying $10 because they are an S-corp, its new tax would only be $150 under Measure 67.

But let’s accept for now Wills’ implicit assertion that Gresham Ford is a C-corporation, as well as her claim that the company will have to pay $30,000 under Measure 67. What does that tell us?

If the company has to pay that much, it means that Gresham Ford has $25 million to $50 million in annual sales. That of course raises the question “how does a company that size get away paying just $10 under current law?”

If Gresham Ford had just $160 in profits on their $25,000,000 to $50,000,000 in sales, their state tax would be $11 ($160 times 6.6 percent corporate income tax on profits).

How can Gresham Ford have $25,000,000 to $50,000,000 in annual sales of cars, repair services and parts and have less than $160 in profits? They must have a damn good accountant.

But let’s assume they do just pay $10 (if they don’t, they are either lying to The Oregonian or they are paying $10 because they are an S-corp and they are lying about facing a $30,000 tax under the measure).

So now let’s see if $30,000 really means they may have to lay off an employee or raise car (and maybe repair and parts) prices.

The $30,000 represents just 0.06 percent to 0.12 percent tax on Gresham Ford’s sales of cars, repair services and parts. That means that when they sell a vehicle or parts or repairs for $25,000, the tax associated with that $25,000 sale would be only $15 to $30 dollars. Is that really something that’s going to break the bank?

Heck, Gresham Ford donates 10 percent of repair costs (that’s about 100 times the minimum tax liability), or $100 on the purchase of a new car, to the charity of choice of their customer (Be sure to mention the Oregon Center for Public Policy next time you get your car repaired there or when you buy a car from Gresham Ford!).

Not only does the math fail to support Wills’ claim, she ignores that Gresham Ford hires its employees to help the business make money. Do they hire workers for any other reason? By laying off a worker, their business would suffer.

Gresham Ford’s arguments are curious, at best.


Ocpp_final_1 Chuck Sheketoff is the executive director of the Oregon Center for Public Policy.   You can sign up to receive email notification of OCPP materials at www.ocpp.org

  • (Show?)

    Chuck,

    Of course her competition in Oregon will also have to pay the tax and therefore she will not be at a competive disadvantage. The dealers in Vancouver have to pay higher taxes and pass on sales taxes to Washington customers.

    Apparently when confronted with this argument Ms. Wills says that her real competition is on-line dealers who are based out of state and will not pay the tax. Is that true? If they deliver a car in Oregon are they exempt from Oregon business taxes? My impression is that any on-line company selling a Ford has to go through a local dealer for delivery, etc. and there would be a local business income that is taxable, let alone the post sale servicing.

    Any one know the answer to this?

  • (Show?)

    Chuck Sheketoff: Gresham Ford’s arguments are curious, at best.

    That's a nice, polite, way of saying they're sociopaths who are more the willing to lie through their teeth to squeeze another dime of profit out of anything they possibly can.

    In other words, a (used) car dealer.

    By the way, one of the ways these charity-donation things work, is that the merchant claims the tax credit of the extra 10% they tack on the price their charge their customers. In other words, when a customer who pays $50 for an overpriced $45 oil change, because $5 goes their favorite charity, it's the dealership that claims the customer's tax credit. They get a marketing ploy, get to overcharge, and get the tax credit.... win-win-win.

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    I have talked with many a business owner who thought they were a C corp and discovered they were an S corp and would only pay $150 more in taxes under Measure 66/67. Recommend to all to ask their friends if the business is C or S corp. If the business owner doesn't know....... strongly suggest they call their accountant.

  • RickW (unverified)
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    Your article, like the Oregonian's fails to recognize one VERY important fact that is at the heart of the issue. The proposed tax is on SALES, not profits. It's no secret that the auto industry, especially domestic brands have been devastated over the past 2-years. Most locally have not made a profit and several have closed.

    Granted sales of 25-million plus seems like a lot of money, but the reality is under the economic climate of the past 2-years there has been little, if any profit generated.

    The average new car sells for around $25,000, but most dealers only makes about $1,000. With this whopping $1,000 they have to pay for advertising, salaries, lights, insurance...and taxes. The days of reputable car dealers making a killing on car sales have over for years.

    The point is, this tax makes the assumption that high sales mean high profits. This assumption is wrong.

  • Bob Wiggins (unverified)
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    I don't see why the Gresham Ford situation is so confusing to you Chuck. You have undoubtedly noticed that 2009 has been a bad year for car sales (other then the temporary boost from Cash-for-Clunkers). To the extent cars have sold, there has been serious price discounting. In other words, I suspect their 2009 revenue is way off their 2008 revenue. Meanwhile, rent, interest on loans covering the inventory, salaries for sales people, repair people and office staff, and all the other expenses of the business have remained at prior levels (or at least haven't fallen as much as revenue has). So of course they are losing money, meaning they have no income to tax under the corporate income tax. And don't you think that if they could just raise the price of their cars and services, they would have done so already (without the prodding of the new gross receipts tax)? The new gross receipts tax you're so supportive of will hurt businesses that aren't making any money. (In fact, it's designed to be payable only by C corporations with NO Oregon taxable income.) From your point of view that may be just fine, but it's not fair to suggest that anyone who says the tax will hurt them isn't being honest. Bob Wiggins

  • Jim Houser (unverified)
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    It is also curiuos that the O's Harry Esteve failed to make any of these reasonable inquiries in his published story. Chuck, yours were the questions I was asking myself as I read his piece. Thanks for providing context.

  • (Show?)

    Meanwhile, rent, interest on loans covering the inventory, salaries for sales people, repair people and office staff, and all the other expenses of the business have remained at prior levels (or at least haven't fallen as much as revenue has)

    Yet when the Left makes this same argument regarding state government, with the additional data point of increased need for services during hard economic times, Your crew calls Bullshit every single time.

    Maybe Gresham Ford needs to look to the internal WasteFraudAndAbuse that undoubtedly is the real reason for their current plight.

    Yeah, That's the Ticket.

  • LT (unverified)
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    "The proposed tax is on SALES, not profits."

    My understanding of the measure is that the tax on sales is only on those with sales over a certain amount, not to mention the whole S corp vs. C corp stuff mentioned above.

    IF sales are above a certain amount AND the person complaining has a California address, we are supposed to oppose the new taxes (and not ask for alternatives from the anti-taxers on how to balance the budget without the taxes) because the 11th Commandment is THOU SHALT NOT TAX SALES, ONLY PROFITS ?

    I just don't see the logic. But then, I'm not a business lobbyist!

  • Scott in Damascus (unverified)
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    Once again Chuck proves that math has a liberal bias.

  • rw (unverified)
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    Pat, I don't quite get what you just said?

  • mp97303 (unverified)
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    Roach and his wife don't earn enough from their business to reach the $250,000 annual earnings threshold that triggers the personal income tax increase spelled out in Measure 66.

    Funny how people tend to support taxes THEY don't have to pay.

    Kinda curious this statement was left out of Chuck's piece: Wills, who runs one of the area's busiest car dealerships, agrees that her business should pay more than the $10 minimum tax it typically pays.

    Seems she supports raising corporate taxes as well, just not in the way they are being done.

    Are we going to see an expose on Paloma Clothing as well? You never know, maybe they have a really good accountant as well.

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    RW: Just interested in how closely the Wiggins argument concerning the Ford dealership mirrors arguments made by the left concerning shortfalls in government funding, and all without any demonstration of awareness on the part of Mr. Wiggins.

    When the state has shortfalls, they need to cut cut cut. When A car dealer with millions in annual sales faces a shortfall due to the new corp minimum they need a break break break.

    <hr/>

    mp3 player: As a partner in a C-corp, I support raising my own corp minimum and I will be paying more money now than I would have under the plan favored by Mr. Wiggins' lobby, which was to tax Gresham Ford and my firm the identical dollar amount 0f $300.

    Under 67 I'll pay around $500 and Gresham Ford will pay $30,000. I find that more equitable, despite getting dinged for an extra couple of hundred bucks annually.

    Do you see it differently?

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    What's missing from the argument is the fact that individuals have been shouldering an increasing majority of taxes over the past twenty years while corporate tax responsibility has been shrinking.

    At least 97% of Oregon taxpayers will not pay a dime in increased taxes with measures 66 and 67. Curious that the anti-tax groups won't own up to that fact.

  • Robert Collins (unverified)
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    Paulie, It seems incredible to me that a business owner would be confused about their corporate organization. An LLC versus sole proprietor, maybe. But C or S.... not a chance.

  • Bob Wiggins (unverified)
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    Mr. Ryan, Gresham Ford isn't asking for a break. They are opposing a new tax the legislature is trying to impose on them. The difference between Gresham Ford and the state is that if Gresham Ford can't either increase revenue (by convincing people to buy more of their cars or repair services) or decrease expenses, or, hopefully, both, they are out of business (and their employees are out of jobs).

    If the state's expenses exceed its revenues, it can legally compel people to increase its revenue by just increasing tax rates (unless, in cases like Measures 66 and 67, the people stand up and say "no".) Bob Wiggins

  • (Show?)

    Mr. Ryan, Gresham Ford isn't asking for a break. They are opposing a new tax the legislature is trying to impose on them.

    You'll forgive my skepticism, but if you've been paying $10 all this time and now you're being asked to pony up $150--I'm having trouble seeing an objective and reasonable case for opposition.

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    Bob Wiggins,

    I do indeed see and understand those differences. Do you see the validity of my argument?

    Are you willing to argue that the $300 "flat tax" corporate minimum intially supported by your group is somehow more equitable, than this one that you are so strongly opposing?

    <hr/>

    Don't get me wrong. I love saving money through efficiency, especially tax dollars sent to the state to "promote the general welfare".

    This whole fight is not about whether somewhere some state employee or department can do a better job or in fact needs to be eliminated. Those eternal truths will always exist in both the private and public sectors.

    This one's about whether firms like Gresham Ford are being treated unfairly by the state and whether the corporate minimum increase, fair or otherwise, was accurately represented by the Oregonian and by the dealership's spokesperson.

  • Bill Holmer (unverified)
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    How can Gresham Ford have $25,000,000 to $50,000,000 in annual sales of cars, repair services and parts and have less than $160 in profits? They must have a damn good accountant.

    How clueless can you be? Anybody who is even remotely aware of the retail car business knows that car dealers have been hemorrhaging money lately, and most are barely hanging on by their fingernails.

  • LT (unverified)
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    Under 67 I'll pay around $500 and Gresham Ford will pay $30,000. I find that more equitable, despite getting dinged for an extra couple of hundred bucks annually. Posted by: Pat Ryan | Nov 23, 2009 12:38:37 PM Do you see it differently?

    Posted by: mark | Nov 23, 2009 12:47:23 PM

    What's missing from the argument is the fact that individuals have been shouldering an increasing majority of taxes over the past twenty years while corporate tax responsibility has been shrinking. .........

    Mark and Pat bring a great addition to this debate.

    Pat McCormick and those on his side talk about what "the business community " wants.

    Since when did individuals become spectators because the whole political conversation in this state is about what this "community" and that "community" want.

    Business people who don't agree with McCormick have the right to tell people they know what they believe about these measures, rather than the nonsense that they should be silent and let "the business community" speak for them.

    This has been a problem for decades--the idea that a group speaks for all members, so the members should just shut up and not say anything. Individual members of any group have the right to talk publicly, talk to their friends, etc.

  • (Show?)

    I expect that Gesham Ford was losing money earlier this year and late last year. My understanding from a 3rd party is that they have been profitable lately, but I have no way of really knowing since the reporter did not ask the most basic questions. However, since a lot of dealerships were closed by the auto companies with the goal of making the surviving dealerships more profitable we should anticipate that Gresham will be profitable going forward. We should also remember that Ford has been the most successful of the companies in this recession and it was nicely profitable last quarter. I suspect its remaining dealerships are doing just fine.

    I also know that somehow auto dealers in Washington state exist with a tax on sales that is 5x the proposd tax in Oregon. How could there be any car dealers left in Washington state with such a heavy burden?

  • Bill Bodden (unverified)
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    "The other business owner, Bess Wills of Gresham Ford, said that the new minimum tax will cost the business $30,000 and might mean laying off a worker or raising the price of cars she sells."

    This is more likely a case of spin than math. Based on my experience and those of others I have shared stories with, most car dealers appear to go for the maximum price they can get. How can they raise something that is already at its upper limit? If the chamber of commerce wants to get sympathy for their members, car dealers are not the best choice for spokespersons.

  • the plasticgraduate (unverified)
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    As an independent contractor living off the grid, I know nothing about accounting, either. But if Wills is going to have to let go of an employee for $30,000, she should do so anyway, regardless of any new taxes.

    Let's say she has a full time employee making $10/hour to whom she does not offer healthcare coverage. That employee will cost her around $20,000 in salary and another $5,000-6000 in taxes and sick days (forget about costs associated with training and turnover). If a $25,000 employee is only worth $30,000 to her, fire him now. He's probably costing her more money than he's worth.

  • mp97303 (unverified)
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    What's missing from the argument is the fact that individuals have been shouldering an increasing majority of taxes over the past twenty years while corporate tax responsibility has been shrinking.

    Basis for that claim?

  • Bob Wiggins (unverified)
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    Pat, not that it matters, but I'm not in any "group" represented by any lobbyist in the last session. I suspect that most businesses in this state (like mine) are not members of OBA or any of the other groups represented in Salem by lobbyists. Before June (when I learned what the legislature was trying to do), I somewhat foolishly assumed the group representing me was the legislature and the governor.

    On your question, if the legislature had just raised the minimum tax to $300, I would have probably grumbled a bit but certainly would not have become involved in any referrendum effort. Bob Wiggins

  • LT (unverified)
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    So, Bob W, you are for a flat tax. $300 for a partnership or LLC, $300 for a small business, $300 for a company with a million dollars in sales. Do I understand that correctly?

  • alcatross (unverified)
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    Pat Ryan commented: Don't get me wrong. I love saving money through efficiency, especially tax dollars sent to the state to "promote the general welfare".

    For the record, there is no 'general welfare' clause in the Oregon Constitution.

  • (Show?)

    As noted on the Washington Department of Revenue website, auto dealerships can be subject to a variety of B&O tax classifications, but in general they are subject to the 0.471 percent tax rate. If Washington auto dealers can handle a tax 4 to 8 times as large as the tax Gresham Ford would pay, I really don't worry that Gresham Ford can't handle the new minimum tax.

  • (Show?)

    As noted on the Washington Department of Revenue website, auto dealerships can be subject to a variety of B&O tax classifications, but in general they are subject to the 0.471 percent tax rate. If Washington auto dealers can handle a tax 4 to 8 times as large as the tax Gresham Ford would pay, I really don't worry that Gresham Ford can't handle the new minimum tax.

  • Theresa Kohlhoff (unverified)
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    Have there been any polls lately? How have they been going on this? Any differences based on geographical areas?

  • Patrick Story (unverified)
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    Chuck, And thank you as always for the clarification. I knew when I first read the story that there must be a lie about the amount of taxes she claimed. I hope someone well-qualified will send in a letter to the editor to get this cleared up. I'm reminded that much of the sorrow we all face right now is still coming from the big Cheney/Bush tax giveaways to the rich, which live on in spirit.

  • A Conservative Democrat (unverified)
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    If the know it all “progressives” (progressives being the assumed name for the socialist thinkers) in Salem actually had experience in the private sector of the business world and knew anything about the car business, they just might be intelligent enough to understand that new car dealerships do not make money selling cars, they make their money in their service and parts departments. Much of the profit on the sale of a new vehicle does little more than pay a sales person’s commission.

    Most reasonable people would agree the minimum corporate tax in Oregon is way too low and needs fixing. But replacing it with excessive taxation such as this tax on gross sales, especially in a low profit market, is going way too far in the opposite direction - and a very good reason why voters need to reject the entire collective package.

  • Buck Eichler (unverified)
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    To conservative democrat; I don't know if you've looked deeply into the tax changes from this measure, but they are not onerous to anyone as best as I can tell. Consider that only profitable C corporations will be affected in a measurable way. The structure seems to be pretty good about distributing the tax liability based on the ability to pay. I do know that the corporate share of Oregon's tax pot has shrunk from 16 down to 5% in recent years. This was due to the effective actions of aggressive business lobbyists. The tax burden to working families has risen to meet that shortfall, and this is one of the reasons they have been losing buying power year after year. Certainly you agree that a robust middle class economy is a major economic driver. We really need to get it back. Also, as you are aware, the 700+ million coming from this tax package is not additional revenue to the state, it is replacement revenue for the gaping hole that remained after all the other budget cuts, layoffs, furlough days, etc. were enacted. Losing this revenue would cut very deeply into the state budget and cripple our public schools. Ask yourself, if you were being asked to relocate to Oregon and you found out they were not supporting their schools, would you want to move your family here? This is one reason companies won't relocate to failing communitites. They can't recruit or retain good employees in such an environment. Sure, tax impacts do have some effect, but we are not seeing any justification for mass layoffs. I believe the negatives I've outlined as a result of not passing these measures are much more severe, and will prevent economic recovery not just now, but for many years to come.

  • LT (unverified)
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    "But replacing it with excessive taxation such as this tax on gross sales, " implies every business will be affected by that tax, when only some businesses will be.

    Nothing "conservative" about confusing the issue--or is there?

  • Peri Brown (unverified)
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    The difference is simple, to my thinking. You have to have clothes, you don't have to have a car. One can afford to build a relationship, the other appeals to base instincts and dissembling to create demand.

    This country is screwed because the former is not the default model, the latter is. Al-quaeda correctly realized in the 9/11 attacks that the US economy is very vulnerable to the effects of fear, as you don't need to but 1/2 what you do.

  • Bob Wiggins (unverified)
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    This entire discussion is fascinating to me.

    The new corporate gross receipts tax would apply only to C corporations with little or no Oregon taxable income. (You can confirm this from Chuck Sheketoff's flow chart.) If a C corporation has tiny gross receipts, it pays the $150 minimum. If it has lots of gross receipts but still no taxable income, it pays a lot more in minimum tax (up to $100,000).

    Gresham Ford says they are an example of a company that would pay a significant amount of gross receipts tax ($30,000) even though they will have little or no Oregon taxable income this year. Rather then admit that that will be the case for a lot of Oregon businesses if the gross receipts-based minimum tax survives, many of the posters here simply argue that Gresham Ford must be "lying."

    Many unprofitable Oregon businesses will pay significant amounts of new tax if the gross receipts tax survives. Gresham Ford says they are one of them. I don't see any reason for Gresham Ford to say they would be subject to the tax when they won't be, but there will be many unprofitable companies subject to the tax, because the legislature itself estimates that the gross receipts tax will raise about $45 million (according to Table 12 of the Legislative Revenue Office Report, looking at companies with more than $500,000 in sales) and the tax only applies to companies with NO OREGON TAXABLE INCOME.

    Oregon has a corporate income tax. It also has a flat minimum tax (which at $10 could certainly be raised to some reasonable level). Until now Oregon has not had a corporate gross receipts tax. The legislature's bill would cause Oregon to have both a corporate income tax and a corporate gross receipts tax, but the gross receipts tax would apply only to companies without enough taxable income to be subject to the income tax. Although the new gross receipts tax would start at only 0.1 percent of sales, after it is in plalce, it would be very easy for the legislature to increase rates and broaden its applicability.

    In my view, adding this new corporate gross receipts tax to the mix is terrible public policy. Maybe you disagree with me, and that's fine. But arguing for the tax by saying that anyone who says they would be subject to it is a "liar" is, at least in my opinion, really a weak argument.

    Bob Wiggins

  • matthew vantress (unverified)
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    hey mr sheketoff why dont you be honest with us in your article?that 10.00 minimum is not even a tax its a registration fee falsely reported by democrats as a tax.mr sheketoff businesses in oregon pay a heck of a lot more in taxes than the 10.00 baloney you full of it liberals claim.they pay thousands and millions more in hidden taxes like fees,system development charges,taxes on their profits and etc that you democrats and pro tax more folks are too scared,lazy and afraid to mention in your arguments chuck.start being honest with us chuck or dont post on here at all unless you can post the real truth about how much businesses actaully and really pay in taxes.

  • Greg D. (unverified)
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    Gross receipts taxes (such as the Washington B&O tax) do affect businesses with high gross receipts and small profit margins. Car dealers and grocery stores are classic examples of businesses which bring in very high dollar amounts in comparison with their "profit".

    There is nothing wrong with a gross receipts tax and it does catch a lot of businesses who use aggressive accounting and executive bonuses to reduce "profit" to zero every year and thereby avoid income taxes computed on "taxable income".

    Is there any poling information on these measures? My gut feeling is that the rank-and-file voters will stomp these two tax proposals into the dust regardless of the intellectual arguments either way, but I keep waiting for somebody to publish some meaningful polls.

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    Bob,

    Can't disagree with any of the actual facts that you put forward in your latest comment (and bear in mind that although we're on opposite sides on this one, I haven't been calling anyone out for alleged "lies")but;

    How is it more equitable to run a $300 flat tax instead of a graduated scale with a bottom end of $150 that would apply to 90%+ of Oregon businesses?

    When we explain the actual numbers to small businesses their reaction is not one of glee at the opportunity to pay taxes, but rather one of relief, as somehow mysteriously and (alleging no skullduggery), these business owners have been told (by someone) that the taxes coming their way are so huge and disastrous that they will force them out of business.

    We see them daily, and now it's a matter of whether these business owners will decide to support the measures based on a bunch of misinformation that's being floated out there by various lobbying groups that claim to represent me ande other small business owners, or if they will get solid info on which to base their decisions.

  • matthew vantress (unverified)
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    buck eichler we are supporting schools very generously now at 10,000 bucks a kid and have for years.btw have you bothered to notice oregons high unemployment rate lately mr eichler?tax businesses more and more jobs leave oregon and our unemployment rate goes up.is that what you liberals really want?there is no budget hole mr eichler the govt class is still getting their pers pension fattened like thereis no tomorrow and the state is still wasting millions of dollars on consultants and more pers pension state jobs.enough of this crap that this tax going down will cripple our schools..they will still be getting 10,000 per pupil.in case you have not noticed mr eichler the economy is bad and many of us are struggling to survive and have had to cut back.when has the greedy,selfish state govt ever cut back and when has the govt ever been cut?what budget cuts?i have not seen the state cut anything mr eichler.i do not fall for scare tactics and it appalls me that so many of you on here still cant see through the same old tired baloney and gloom and doom for education scare tactics after all these years.come on people wake up for once and start seeing through this crap like i didi years ago.

  • Bob Wiggins (unverified)
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    Pat, I have no way of knowing whether either campaign has been engaged in disinformation. In the speaking and writing I have done, I have always attempted to be correct factually. I haven't heard anything out of Oregonians Against Job-Killing Taxes which isn't factually accurate (or the expression of what I would consider a reasonable opinion about future consequences).

    Just to be clear, I'm not crazy about raising the flat minimum. As a matter of philosophy, it seems incongruous for pass-through entities like S corporations and LLCs to pay any entity-level tax, and if a C corporation has no taxable income, it has no taxable income and shouldn't be subject to an income tax. Having said that, the flat minimum has been part of the tax law for decades, $150 isn't a "deal killer" financially, and many other states have a minimum, and even a $150 minimum wouldn't be way outside the bounds of what most states do. So, OK, fine, raise the minimum to $150 or even $300. It's not a new tax, it's not much of a disincentive to business activity, and it's basically a charge for the privilege of operating an entity in the state. I don't like it, but it would be reasonable to do that as part of an overall package to balance the state budget.

    The gross receipts aspect is a way different matter. It is a new tax. It will in many cases be a very significant disincentive to business activity. It will be easy for the legislature to raise the rate once it is in place. And it is on businesses that have no profit (as defined by the Oregon income tax). The only good thing about the corporate income tax is that a compamny doesn't owe it unless it is actually making money. Not so with a gross receipts tax. And having both taxes will make Oregon a much worse tax environment for business, which ultimately is the source of jobs, wealth and tax revenues.

    Bob Wiggins

  • A Conservative Democrat (unverified)
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    Buck,

    I agree Oregon corporate and business taxes need to be increased to better balance the revenue stream and relieve the excessively increasing tax burden on the working class. However, a tax on gross sales for low profit businesses like new car dealerships and grocery stores is not the way to do achieve that balance. And don’t just blame the lobbyists either for this situation either. The legislature and the Governor need to take a good share of ownership of that responsibility. Far too much of Oregon’s financial resources are blowing in the wind and have gone to bankrupt companies through the energy tax credit program and other business subsidies. As for the schools, with present day expectations where the desire is for everything to be new and replaced, where teachers pay raises come first and where the call for mini classes that are continually being downsized as opposed to the 30 student plus normal sized classes of the 50’s 60’s and 70’s where many in the business world were educated; the schools will never have all the money they want. Funding the basics must be the priority as must reducing the rapid growth rate of government.

  • (Show?)

    I haven't heard anything out of Oregonians Against Job-Killing Taxes which isn't factually accurate.....

    Starting with the name, they either assert that all taxes are "job killing" or they only oppose those that are. Since they were formed expressly to oppose 66 and 67, they are claiming that $.41 per day (67) kills jobs. I'd call that a bit disingenuous. Regarding 66, I get it that you object to the permanence and potential for future disgreeable behavior, but you must be aware that a marginal tax on income above $250,000 (for families after all deductions) is unlikely to kill "70,000 Oregon jobs" anytime soon, despite OAJKT's assertions.

    As to the accuracy of their website and by extension their talking points, it's pretty obvious to anyone who can use The Google that all of their "factual" arguments are couched in libertarian economic theory, and feature the writing of only two Distinguished Economists, both on the payroll of the Cascade Policy Institute. (Looking at recent national economic history I'm puzzled that few have followed the Apostle Alan Greenspan in his total repudiation of Freidman and Rand, but that's another post.)

    So anyhow as near as I can tell, so far means that OCPP has every economist in the state except for two. (a very slight exaggeration)

    Finally, OAJKT is funded and staffed by the same old tired crew that's been around for decades, arguing that government itself is fundamentally useless and that any and all taxes are a personal affront to business and to all citizens. They are (in no particular order) Mark Nelson, Ross Day, Kevin Mannix, and Russ Walker.

    They all have records in Oregon politics, and a lot of that history involves less-than-ethical behavior by my standards and some illegal behavior too according to the state.

    Strange bedfellows for progressive businesssmen.......Which I believe you to be.

  • matthew vantress (unverified)
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    have any of you jokers on this site that support increasing taxes on corporations bothered to notice oregons high unemployment rate recently?why do you want to run more jobs out of this state?how about a cut in the size of the state govt instead?why is it i am the only poster on blue oregon that ever calls for that?

  • Gil Johnson (unverified)
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    Some commenters have observed that while the minimum tax for some corporations is going up dramatically, so are their costs of doing business, such as rent, utilities, etc.

    Rent it a big expense for a car lot (unless they own the property, and then the mortgage is a big expense). It's also the major expense in my dinky little business. I just negotiated a new lease with my landlord that is more favorable than the previous five-year lease. My landlord also owns a building that houses a Starbucks and he told me Starbucks has requested a 25% reduction in rent on all of its properties nationwide, because of the economy. A lot of landlords will probably give in to this demand because they know Starbucks has been cutting back stores and they don't want to lose a stable tenant.

    Gresham Ford is nowhere as big as Starbucks, but I bet they have enough leverage to roll back rents on their lot and offset this new tax. And if they own the land, they probably can refinance their mortgage. And if they own the property ourright, they should be making a lot of money.

  • john silvertooth (unverified)
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    The Curious Meth of Corporate Oregon-

    The Sunday Oregonian featured a story comparing two businesses and their different views of cheap crack.

  • LT (unverified)
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    "The gross receipts aspect is a way different matter. It is a new tax."

    Have you met Sen. Telfer? At the ballot title hearing, she asked people to imagine a voter who is upset about a new tax. Maybe you are that voter.

    But for many people this is not a question of philosophy.

    "As a matter of philosophy, it seems incongruous for pass-through entities like S corporations and LLCs to pay any entity-level tax, and if a C corporation has no taxable income, it has no taxable income and shouldn't be subject to an income tax."

    The legislature balanced the budget with a combination of budget cuts and taxes. You don't like what they did. Had people of your political persuasion been in majority, the budget balance could well have been different.

    But putting the taxes on the ballot means ALL voters have the potential to cast ballots---for any reason they choose. They may agree with you. They may think what duly elected officials do should stand. They may think that if there is no valid alternative being discussed (THESE ARE BAD TAXES is opinion, it is not a plausible alternative) and with no alternative available they will vote to uphold the action of the legislature.

    OR, they may just think Pat McCormick et al are not making the sale (politics is more like sales than some people like to admit, and in any sales situation the customer has the right to walk away and is not required to buy what is being sold).

    They might even have had an encounter with McCormick, or De Hart, or Russ Walker or anyone else connected to the campaign and have long ago decided that they are tired or rude activists and whatever those folks are supporting they will vote the other way.

    Bob, you may not like that, but that is reality. I've known people who are not political activists, but they do vote. And sometimes vote for the person who was once nice to them or against someone they dislike, distrust, etc.

  • LT (unverified)
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    "As for the schools, with present day expectations where the desire is for everything to be new and replaced, where teachers pay raises come first"

    Do you have data that in every Oregon school district that is true and in no school district in Oregon have the contracts been reopened (often because the contract contained a clause that under certain circumstances like budget shortfall the contract reopening clause could be exercized)?

    I will believe that when I see the data. But my guess is that is just opinion, not backed up by actual school board/school budget committee actions of the last couple years.

  • LT (unverified)
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    "bothered to notice oregons high unemployment rate recently?"

    Matthew, do you have any data on job creation after the Measure 30 election? The folks behind Measure 30 claimed jobs would vanish if they lost, everyone would be employed if they won.

    It would seem logical that if there were job creation data for 2004 showing the impact of Measure 30, we would hear about it incessently. That no one talks about such data makes me think there are other factors in job creation (whether small business can get credit, for instance) which have nothing to do with legislative action on taxes.

  • Ms Chan (unverified)
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    I have yet to see the comments that these corporations 1) can write off 100% of the taxes they pay or 2) if they have a loss in one year, can carry it over. And the tax on sales is, I believe, on NET sales and not GROSS sales. I would also like to add that, while their corporate status with the IRS or state is confidential, I thought their status with the Secretary of State or SEC (if they are publicly traded) is public information. Bottom line for me, we all need to pay our fair share. The scales have tipped way over on to personal tax payers and needs to be rebalanced.

  • Bob Wiggins (unverified)
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    This thread may have run its course, but here are responses to a few points people addressed to me.

    Pat, I don't think there really is much argument against the notion that these tax increases will negatively impact private sector employment. Pozdena and Connerly have said 70,000 jobs; maybe that isn't the right number (since economists always seem to be worse at accurate predictions than the weatherman), but the tax increases will result in fewer, not more, private sector jobs. Read carefully the report of the Defend Oregon economists. Even they say the tax increases will impact private sector business activity; they just conclude that the government spending will more than offset the negative impact on the private economy and that that is a better policy course in a recession. Obviously there is disagreement on that ultimate question.

    LT, of all the people you mention in your post, the only one I have met is Pat McCormick. I have known him for years and I like him. (In a speaking engagement on behalf of Oregonians Against Job-Killing Taxes, I met two guys from Defend Oregon who spoke on behalf of the other side, and they seemed like nice guys too. This is an important issue, but opposing viewpoints do not make people liars or evil.)

    On your main point, this will be decided by the voters, and we'll see what happens. One unfortunate aspect of the process is that the choice in the election is just an up-or-down on the legislature's bills; there isn't a mechanism for the broader question of what should we do instead. If the tax measures go down, I'd be very interested in participating in that discussion, but since I'm not a legislator or lobbyist, I suspect there won't be much opportunity for meaningful participation. But if anyone asks, I'd be delighted to try to help (but I probably won't stay glued to my phone waiting for the call.)

    Ms. Chen, the gross receipts tax is on gross sales, not net sales.

    Bob Wiggins

  • Lord Beaverbrook (unverified)
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    There's a really good discussion trying to break out, Ms. Chan, but the regulars have to food fight with cut and paste dittoheads doing their homework for Sean and Glenn. The management would rather count their hits than support our discussion.

    You really have to support folks like Bob Wiggins and Ms. Chan over people like matthew ventress, that have nothing to say, and are merely here to get a reaction. It's not a minor inconvenience. These gen X males were purpose bred for this during the Reagan baby boom. They are the love children of Edwin Meese and Pat Robertson, raised by Morton Downey.

    Maybe matthew ventress has seen Jackass so many times, he's decided he wants to be a Dem.

  • LT (unverified)
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    Bob, you are an intelligent debater, and we should give more credence to people like you than those like matthew v. who only want to get reactions.

    A suggestion you might want to give your friends at OAJKT;

    You said, "One unfortunate aspect of the process is that the choice in the election is just an up-or-down on the legislature's bills; there isn't a mechanism for the broader question of what should we do instead. If the tax measures go down, I'd be very interested in participating in that discussion,"

    There is a mechanism, just not written into law and thus requires individual action.

    There is no reason that legislators or others opposing the taxes can't go public with "here is our proposal if the taxes are defeated....". I heard something about St. Sen. Republicans trying to do just that.

    My St. Sen. is on Ways and Means and has strong feelings on the matter. I have had very intelligent discussions with her office on this subject.

    As opposed to my state rep. who thinks THESE ARE BAD TAXES, "gee, I'm not on Ways and Means...." which sounds like the old comedy routine around the line "not my job", or to suggest that we just drain ending fund balances.

    There is nothing which prohibits individuals, groups, elected officials from starting a conversation now on the value of ending fund balances or spending on various programs vs. the slogan "but at least we didn't raise your taxes". My state rep. got a look of "this does not compute" on her face when I suggested a vigorous debate about that before the election.

    A gamble is one where no one knows the odds. I believe it is a gamble to oppose taxes without providing a concrete alternative to be debated (or is the worry it might be taken apart and component parts analyzed prior to the election --said cynically--and someone saying 'the alternative does not add up, I'm voting yes?).

    I have found people I know (people who vote but are not activists) see asking the question "OK, what is your alternative?" as a very valid point.

    One more thing: the Internet is wonderful in a variety of ways, incl. checking sources.

    There is a point of view that to some voters, complexity and explanation are better than labels. That complexity can include considering the source of information.

    I thought I recognized the name Connerly, and sure enough, he has been involved in political debates for a long time. As has this group:

    http://www.sourcewatch.org/index.php?title=American_Institute_for_Full_Employment

    For some people, then, the debate could be determined by statements like "if you trust Connerly, vote no, but if you have disagreed with him in the past, vote yes".

  • Bob Wiggins (unverified)
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    LT, I don't represent anyone but myself, but I'm always happy to engage in a debate on alternatives. But the people who actually get to decide are the legislators, not you and me. Even if the opponents of the taxes were to put forth an alternative plan, it really doesn't mean anything because if the taxes are voted down, it's up to the legislature to produce Plan B, and they would not be compelled to follow the proposed alternative.

    This is a big mess (I think even bigger than most folks seem to appreciate), and it will take creativity and a willingness to compromise on the part of the legislature to fix the mess. As for me, the solution needs to address both spending control and tax policy, or we'll keep having these crises year after year.

    On the spending side, we need to address PERS; mandatory spending on particular programs and policies without regard to budgetary constraints (such as Measure 11 and entitlements); and some mechanism for controlling the overall level of state spending (or otherwise, there will never be a time when tax increases are not necessary). Some programs will need to be eliminated, but, at least to me, across-the-board cuts, which seem to be the usual government response, are wrong. They end up hurting the most important programs, and keeping the least important ones.

    On the tax side, the state budget is far too reliant on the income tax, on tax revenue from large capital gain transactions (that often have a way of taking place in Washington rather than Oregon), and on Phil Knight. Because of our reliance on the income tax, the state has less business activity than it otherwise would, and the government's tax revenues swing wildly from year to year. Income tax rates should be reduced, not raised, and the tax should be made progressive at lower income levels as well. Every single tax credit and the kicker should be on the table for elimination. A broad-based consumption tax at a low level should be considered as well. There are 49 other states, and none of them has a tax system as over-reliant on the income tax as we do. There is no good reason not to look hard at the states that are more successful than we are and copying what they have done.

    The proposed tax hikes subject to January's vote are almost the exact opposite of what I believe the state needs. If these tax hikes are defeated, which I hope they are, there will be a chance (and necessity) for the legislature to evaluate everything I just wrote, and a lot more. I guess I am not optimistic that they will do a better job than they did in the last session, but if the tax hikes are not defeated, they will not have to even try (until, of course, the next crisis, which will come fairly soon once the new PERs rates go into effect). I hope they are able to get together and do so.

    Bob Wiggins

  • Edward I. O'Hannity (unverified)
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    Well there you go! If you read between the lines of this socialistic manifesto, you will see that it's our economy that is FORD: "Fix Or Repair Daily." We need to completely defund Oregon and sell all its assets to the highest corporate bidder. And Rich-Tweaking Taxes.

    ~EIO

  • Marcia Denison (unverified)
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    If Gresham Ford is a C corporation and the employees had all been D students in an underfunded school system, wouldn't they lose more than $140.- ? What if their mechanics couldn't read a repair manual or a work order and never even learned their trade in a school? Would buisness be + or -, and how much would that be??

  • vixigoth (unverified)
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    aw, doesn't it seem obvious, that... there hasn't been enough refinement on the business tax measure. It could definitely hurt fledgling undeveloped businesses that haven't been around long and haven't built their base. If their receipts are high but their costs take up most of that. There should be a more in depth kind of formula that takes things into account, such as salaries and other things that are paid within that corp. Maybe they should have exempted newer businesses. For instance. I'm not sure I'll vote for this one, as it might be harmful to a lot of the tiniest most bootstrap kinds of enterprises. On the other hand it's almost sure I will vote yes on the personal income tax hike. Nobody making over $250,000 gets my sympathy when there are several thousand homeless men, women and teens in oregon, with NO safety net. I blame the legislatures for that, but at least this one is trying.

  • vixigoth (unverified)
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    maybe the corporate tax should have started the new rates at $100,000, leaving those with less gross receipts than that, to the same old rates. But then, Oregon government is notoriously oblivious to just about everyone at the bottom of the economic scale...these people are usually just pawns held hostage to use as human shields when extracting more money out of the populace who might pity them if they notice at all. excuse me if i sound like Oregon has to babysit some of its people. Because actually Oregon should. Babysit, greenhouse, whatever you want to call it. Oregon should be much more nurturant to its lower income and infant corporations/ businesses, that's for starters. If this passes, I hope they will refine it to be just that.

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