A statewide business advocacy organization is sounding the alarm about increasing state and local taxes on companies in Oregon, releasing a new report that finds the total state tax burden will increase 41% by 2022 — and warning that local taxes on Portland area businesses will increase to 42% in the same period if all regional, county and city tax measures on the Nov. 3 general election ballot pass.
"Oregon and the Portland-metro region compete with other states and metro regions for new jobs, and especially with our fellow western states. Cost matters. This increase in the business tax burden is significant and has the potential of making it harder for our state to grow new jobs — and recover from this recession — if we don't put the brakes on new taxes," said Sandra McDonough, president and CEO of Oregon Business and Industry. Its Education and Research Foundation commissioned the report, which in an in-depth, Oregon-specific version of an annual study conducted every year in all 50 states for the State Tax Research Institute to rank state-by-state tax burdens.
All of the enacted and pending tax increases have their passionate supporters, however. They include Democrats, public employee unions, environmentalists, health care providers, social service providers, homeless and affordable housing advocates, and community-based organizations. Voter-approved measures have passed by healthy margins.
According to the report released on Wednesday, Oct. 14, when comparing all 50 states, Oregon already has moved from the 40th position in statewide business tax burden to No. 19 just since 2019.
"In our 18 years of producing an annual analysis of state and local business tax burdens across the country, we've never seen a state jump so far and so fast in our rankings," said Doug Lindholm of the State Tax Research Institute. "Unprecedented state and local tax increases have shifted Oregon from a modest business tax burden state to a high business tax state above the national average and higher than Idaho, Washington and California."
McDonough's organization opposes Metro's $5.2 billion payroll tax measure to fund regional transportation projects and programs. Although it has not taken a stand on the other measures on the ballot. She believes the cumulative effect of recently enacted and pending measures will reduce the Portland area's business competitiveness.
Tax increases on businesses already approved since the start of 2019 studied in the report include:
• The statewide Corporate Activities Tax that will raise $1 billion per year for Oregon schools.
• The statewide Health Care Provider Tax increase that will raise $267 million per year.
• The statewide Paid Medical Leave payroll tax increase that will raise $1.12 billion per year, starting in 2022.
• The Multnomah County business tax increase that will raise $133 million per year.
• The Metro homeless service measure intended to raise $250 million per year that includes a business income tax increase.
• The Portland Clean Energy Fund gross receipts tax that took effect in January 2019 that raised more than $50 million so far.
Measures on the November ballot that would increase local taxes on businesses even more include:
• The Metro regional transportation payroll tax intended to raise $300 million per year.
• A Portland Public Schools construction property tax extension that would raise $125 million per year.
• A Multnomah County libraries property tax that would raise $133 million per year.
• A Portland Parks & Recreation property tax that would raise $48 million per year.
According to the report, the state tax burden on Oregon businesses will increase from 2.0% to 2.8% by 2022. That's higher than the average state and local business tax burden nationally, and higher than neighboring states California, Washington and Idaho.
The report also notes that if a proposed Multnomah County personal income tax measure to fund tuition-free preschool for all children passes in November, the Portland area would have the highest marginal personal income tax rate in the country, with a combined state and local rate of 14.6%.
The full report can be found here.
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