Citizen’s View: Proposed 2.5-percent gross receipts tax would negatively impact all Oregonians

December 24th 2015 – The Oregonian by Jeff Gudman

A proposed ballot measure for the largest tax hike in modern state history — a gross receipts/sales tax that would sharply increase taxes on business revenues that exceed $25 million in Oregon — does not pass the test to provide the biggest bang for the buck. There are better alternatives to generate revenue for programs vitally needed by Oregonians.

A fair tax system in the state is critical. The need for tax reform is critical, but in a way that provides stability and confidence for taxpayers and government programs that rely on the revenue. The proposed ballot measure to impose a 2.5-percent tax on the gross receipts of companies that do $25 million of business in the state is not the way.

If approved by voters, such a tax would harm the state just as we have emerged from the worst recession in decades. It would harm people who can least afford an increase in the cost of groceries — people who already have a difficult enough time paying for food. It would harm first-time home buyers who already have a difficult enough time getting a mortgage, and it would add additional complexity to an already complex code, which adds costs paid by residents.

A 2.5-percent tax on gross receipts also would tax businesses that lose money in any given year at a time when their only other alternative might be to lay off people and/or reduce the pay of those who remain. And it would potentially drive software companies to other states at a time when Oregon is working to continue to develop its high-tech sector.

Imagine: An Oregon farmer sells $30 million in crops to an Oregon food processor. Add a 2.5-percent sales tax on $5 million of that total. The Oregon food processor then sells $30 million in food to an Oregon grocery distributor. Add a 2.5-percent sales tax on $5 million of that.

Next, an Oregon grocery distributor sells $30 million in groceries to an Oregon grocery store. Again, add a 2.5-percent sales tax on $5 million. And when the Oregon grocery store sells $30 million in groceries to Oregonians, add a 2.5-percent sales tax on $5 million again.

How does this help people who can least afford increases in the cost of their groceries?

Is it fair to add costs to the mortgage for a first-time homebuyer? It is not. Is it fair to tax a business that is losing money? It is not. Is it fair to offer incentives to businesses to locate or expand in Oregon and then add additional costs to doing business here? It is not. Is it possible to have a tax like this that does not have a negative impact on Oregonians? It is not.

There is a better way.

At a time when the state unemployment rate is higher than the national average, when the labor force participation rate is lower than the national average and when the number of businesses being formed is below the national average, we as Oregonians should be focusing on creating opportunities for businesses to start and for getting people back to work. When businesses form and employ people, there is more income to support the government programs that are desired and needed by Oregonians.

Good policy benefits Oregonians. The 2.5-percent gross receipts/sales tax is mistaken policy. We should focus instead on smart policies that will benefit Oregonians by providing greater opportunities to generate funds for needed government programs.

Jeff Gudman is a Lake Oswego resident, a member of the City Council and a candidate for state treasurer. This Citizen’s View is a reflection of his own views and not necessarily those of the council.