8 key things to know about Oregon corporate taxes

Chuck Sheketoff

Dark political money is flowing in Oregon. It seeks to squelch efforts in the legislature to raise taxes on corporations. This is happening, of course, as a $1.6 billion revenue shortfall threatens cuts to schools, health care, and other public services that benefit all Oregonians.

Without a doubt, raising corporate taxes is the place to start when it comes to raising revenue — not only to protect vital services from the current budget crisis but also to strengthen them so they improve the lives of all Oregonians.

Here are eight key things to recognize about Oregon corporate taxes.

1. Corporations used to contribute a lot more in income taxes than they do now.

In the mid-1970s, corporations contributed about 18.5 percent of all income taxes paid in Oregon. Today, the corporate share of has shrunk to just 6.7 percent. That’s a decline of nearly two-thirds. This has resulted in Oregon having less money to invest in schools, health care, and other key services. And as corporations have shed their income tax responsibilities, individuals and families have had to pick up the slack.

2. The Oregon Lottery now brings in more than the corporate income tax.

How shamefully low have corporate income taxes sunk? So low that the Oregon lottery brings in more revenue. That’s right. A source paid mainly by Oregonians struggling to make ends meet or with a gambling addiction (or both) does more to support our state’s schools and other vital public services than Bank of America, Verizon, Walmart, and all the other corporations doing business in Oregon combined.

3. Corporate property taxes have also shrunk.

In the late 1980s, corporations and other businesses contributed about half of all property taxes levied in Oregon. Today, they contribute about 40 percent — one of the harmful legacies of Measures 5 and 50 in the 1990s. Property taxes are the second largest source of revenue for Oregon public schools, trailing only income taxes. They are also the main way communities fund services that foster quality of life: libraries, parks, and emergency response services, for example.

4. Oregon, among all states, has long ranked at or near the bottom in terms of business taxes, including corporate taxes.

For over a decade now, Oregon consistently has come out at or near the bottom among all states in terms of its “total effective business tax rate.” This is according to a study funded by a big corporate lobby group.

5. The shrinking of corporate taxes didn’t happen by accident.

Legions of lobbyists, lawyers, and accountants have served corporations well over the years. Corporate income tax contributions have shrunk due to corporations lobbying for and winning many tax loopholes and subsidies, pursuing aggressive tax sheltering strategies, and taking advantage of corporate forms largely exempt from corporate income taxes. In short, corporations have gamed the system.

6. While they avoid taxes, corporations benefit from our tax system and lobby for tax subsidies.

Just because corporations have shed much of their tax responsibilities, doesn’t mean they thumb their noses at what the tax system offers. On the one hand, the tax system pays for, among other things, the schools that educate and train their workers, the courts that resolve their disputes, and the public safety services that protect their property. According to a corporate-funded study, businesses in Oregon get a bigger benefit out of the taxes they pay in Oregon than just about any state in the country. On the other hand, the tax system directly subsidizes corporations through a long list of tax credits, deductions, and subtractions.

7. Until recently, a minority of lawmakers could prevent the closing of corporate tax loopholes and subsidies. That’s no longer the case.

Not long ago, the legislature believed — upon advice of their lawyers — that closing a tax loophole or subsidy required support from a supermajority (three-fifths) of lawmakers. That meant that a minority of lawmakers could block any effort to reform or eliminate a corporate tax loophole or subsidy. A recent Oregon Supreme Court decision, however, has made clear that a simple majority suffices, giving the Oregon legislature significantly more room to maneuver in terms of increasing funding for services that benefit all Oregonians.

8. Corporations hide behind corporate tax secrecy, but it doesn’t have to be that way.

We know corporations as a group are getting away with paying far too little in income taxes, but we have no way of knowing which corporations pay their fair share of state income taxes and which are effective at avoiding taxes. And we know little about which tax credit subsidies they use to pay nothing or next to nothing in taxes. That’s because corporations currently are not required to disclose information on how much they pay and which tax credit subsidies they use. The legislature can force corporations to disclose that information, a move that would allow Oregonians to see for themselves which corporations are paying a fair share and which are not, and pave the way for necessary reforms to our corporate tax system.

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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.

By Chuck Sheketoff April 14, 2017