Oregon Businesses Are Facing Unprecedented Tax Burden
OBI members, I have a request.
If you only have time to read one item we publish this year, please make it the cumulative business tax analysis the OBI Foundation partnered with the State Tax Research Institute (STRI) to publish this month. And then share it far and wide.
In my view, this report is the most important piece of research we have done in a very long time, and we all have to do our part to make sure the results are known to business owners and policy makers in every corner of our state.
For the analysis, the OBI Foundation and STRI contracted with the international accounting firm Ernst & Young to take a thorough look at what’s happened to business taxes in our state over the last decade with an emphasis on the impact of the new taxes enacted in the past two years. On top of that, we asked the accounting firm to look at the enacted and proposed business tax changes in the Portland-metro region, where an astonishing number of tax measures are on the Nov. 3 ballot.
What we wanted to understand was how Oregon’s overall business tax burden, statewide and in the Portland-metro area, ranked compared to other states. We knew before we started that the increases were substantial. But, even with that knowledge, we were astonished when we received the results.
With the changes enacted by the 2019 Legislature, statewide business taxes in Oregon will increase 41% by 2022, when all the new taxes are fully implemented. Drivers of that increase include the new corporate activity tax, the increased insurance premium tax and the paid family leave program. In just two years, Oregon will move from No. 40 among the 50 states to No. 19 in terms of business tax burden, and our overall business tax burden will be above the national average and higher than most of our fellow western states.
Our partners at STRI, who do an annual ranking of the tax burden amongst the 50 states, say they have never seen a state move so far in such a short time.
On top of that, if all of the measures on the Nov. 3 ballot in the Portland-metro area pass, businesses in that area will see their local tax burden increase by 42%. The biggest driver of that increase is the proposed .75% Metro wage tax, which OBI has opposed. That local increase, on top of the state increase, is making Portland an increasingly expensive place to do business.
Now I will say what all of you, as business leaders, already know. Cost matters. Certainly, businesses look at a number of factors when considering where to make the next investment and where to locate jobs. Tax burden isn’t the only consideration, but when all other factors are relatively equal, tax costs — if they are out of line with other competing states and regions — can become the deciding factor.
We have to face facts and understand that Oregon is on the verge of making itself uncompetitive. That’s not the headline we want as we are all trying to climb out of the worst recession in a century so we can get Oregonians back to work and restore family incomes.
Please read our report and forward it to your friends, your colleagues, and your local elected officials. Tell them this: if we want Oregon’s economy to grow and thrive, we need to put the brakes on new business taxes. If we don’t, we need to be ready for jobs to go to another state that understands why cost matters.