CHAIRS:
Rob O’Neill, Moss Adams LLP
STAFF:
scottbruun@oregonbusinessindustry.com
According to an analysis done by the accounting firm Ernst & Young for the State Tax Research Institute (STRI) and the OBI Foundation, Oregon’s business tax burden, measured as projected tax collections, will increase 41% by 2022 due to tax increases adopted in the 2019 legislative session.
Oregon moved from No. 40 among the 50 states for business tax burden to No. 19, a shift that is unparalleled in STRI’s years of analyzing business taxes in the U.S. On top of those statewide increases, the Ernst & Young study also showed that local business tax increases in some locales are adding even more cost to Oregon businesses, making Oregon less attractive for business investment.
Oregon’s overall business tax burden now exceeds the national average and is greater than most other western states. In any economy, such an increased business tax burden – and reduced competitiveness – would be a cause for concern, particularly in terms of the state’s ability to attract business and grow jobs. But in the historic 2020 COVID-19 recession, which undoubtedly will continue through 2021 and likely into 2022, these new tax burdens present even more stress points and will inevitably impact Oregon’s ability to create jobs that will restore family incomes.
Lawmakers must put the brakes on new tax increases.
As lawmakers address expected budget shortfalls for the next two fiscal biennia, OBI’s response to the effort will be guided by these principles:
Do no harm.
Raising businesses taxes and fees, as businesses are struggling to get back on their feet and adjust to the staggering new tax burden, should be off the table.
Protect the projected 2019-2021 ending balance of $1.7 billion.
Dedicate it to maintenance of critical state services in the 2021-2023 biennium.
Balance the budget sensibly.
In the 2021-2023 budget, prioritize maintenance of existing critical services; introduce no new programs; freeze employee wages; and adopt targeted reductions in less critical service areas.
Focus on private-sector job restoration.
Oregon is an income tax-dependent state. The best opportunity for recovering from the recession, and addressing the state budget shortfalls, is getting Oregon businesses back on their feet so that they can restore lost jobs which, in turn, means more tax revenue.
2021 Tax Policy Positions
- Oppose temporary and permanent increases to any business taxes.
- Recognizing the increasing burden on personal taxpayers, as well as pass-through business entities both statewide and at the local level, oppose temporary and permanent increases to the Oregon personal income tax.
- Avoid sector-specific taxes unless they are supported by the impacted sector.
- Support connecting with the federal tax code.
- Oppose disconnecting from the federal tax code on provisions related to the U.S. CARES Act relief.
- Support tax credits to promote economic development and business investment.
- Support legislation to reduce the pyramiding effects of the 2019 Corporate Activity Tax (CAT) through targeted adjustments to the statutory language and, where appropriate, exclusions.
- Oppose any adjustments to the CAT that will have the effect of increasing tax burden for any taxpayer either temporarily or permanently.
- Support establishing an interim committee to review Oregon’s property tax system and to make recommendations to the 2023 Legislature.
- Oppose any proposal to change Oregon’s property tax structure that disrupts the balance between business property taxpayers and personal property taxpayers.
2021 Budget Policy Positions
- Support prioritization of existing critical programs, and put a hold on development of new programs while revenue shortfalls are anticipated.
- Support consideration of a wage freeze for state employees. Savings from a wage freeze will reduce the number of positions that may have to be eliminated as the state makes budget cuts to deal with revenue shortfalls.
- Urge the Legislature to continue to look for opportunities to reduce the cost of legacy programs, such as PERS and PEBB, which impact not only state budgets but also local government budgets.
Policy Principles 2021
These policy principles will guide Oregon Business & Industry (OBI) as we represent our members and the broader Oregon business community throughout the 2021 legislative session.