Street Roots • Oct. 14-20, 2016
Page 9
Commenatary
Questions and answers with an economist on Measure 97
M ary C. K in g is a Professor o f Economics
Em erita, Portland State University. Here she
addresses common questions around Measure 97,
the corporate tax on the upcom ing November
ballot. This is the second in a series o f colum ns
fo r Street Roots from Oregon economists about
the controversial ballot measure.
BY MARY KING
C O N T R IB U T IN G C O L U M N IS T
What will Measure 97 do?
Q
A: Measure 97 will raise taxes on
c corporations with sales over $25 million a
year in Oregon. Only one in 400 businesses
- the very biggest operating in Oregon -
will have to pay more.
Q: Why should corporations pay more
Oregon taxes?
A: Oregon kids are being shortchanged.
Twenty-five years of cuts have left us with
the fourth worst graduation rates in the
country, the third largest class sizes, and a
school year that averages two weeks less
than the minimum most states require.
Passing this
measure will only
restore per pupil
spending to where it
was in the late 1980s,
adjusted for inflation.
That will take a $1
billion addition to our
school budgets each
year. We should do
better, and we also
Mary King
need to invest in public
health and senior
services to meet the challenge of an aging
population.
Q: Is it really true that Oregon businesses
pay the lowest taxes in the country?
A: Yes! Corporate lobbyists never stop
whining about their “terrible tax burden”
and that whining pays off! Corporations pay
less in taxes in Oregon than in any other
state, while using our infrastructure and
complaining about the quality of our schools.
Two big economic consultants, Ernst &
Young and the Anderson Economic Group,
examined state tax burdens by comparing all
state and local taxes paid by businesses with
their profits and the size of the state
economy. Both find there’s no state in the
country where corporations pay less than in
Oregon.
Q: But small business owners are paying
taxes, right?
A: Measure 97 does not increase small
businesses’ taxes at all, because small
businesses already contribute their fair
share. But the biggest, most profitable,
corporations no longer do. These giant
companies hide their profits offshore and
spend millions lobbying for big tax breaks;
federal tax breaks reduce Oregon tax
revenues because the Oregon corporate
income tax form starts with the amount of
“taxable income” from the corporation’s
federal tax return.
Corporations now pay just one-fifteenth of
Oregon state’s income taxes, down from
three times that in the mid-1970s.
Q: Big business pays a bundle to lawyers
and accountants to avoid taxes; why won’t they
escape this one?
A: Measure 97 is designed to prevent tax
avoidance because it taxes sales, which
companies must report. There’s no way to
fudge sales, unlike profits, which
corporations can estimate after they spend
millions lobbying, pay their CEOs
outrageous salaries, travel first class and
keep everyone wined and dined on the -
corporate expense account.
Q: Why won’t corporations be able to pass
the tax on to consumers?
A: This is not a sales tax that will be
levied on consumers.
The few firms affected have to compete
with the huge proportion of businesses that
won’t see a tax increase. They will have to
keep their prices down to stay competitive.
Also, big chains tend to set prices nationally.
Their prices aren’t any higher in states
where they pay a lot more in state and local
taxes.
Q: I f corporations can’t escape this tax, why
do some people say it will hurt lowfncome
people?
A: Sadly, some people are being paid to
say whatever will persuade voters not to
pass Measure 97 to raise taxes on big
corporations.
Others think that these large companies
are operating on such low margins that they
will have no choice but to pass thé tax on.
But corporate profits have been at
historically high levels for years.
Finally, some analysts can’t report that
the tax increase will be paid out of profits
above the minimum necessary just to stay in
business because their models don’t even
include that possibility! For example, the
Oregon Legislative Revenue Office (LRO)
has to use a simplified model of the
economy that assumes that companies
never earn more than they need just to pay
expenses, including the smallest possible
returns to their investors.
a big role in Oregon health care?
Ai Opponents of Measure 97 hope to
frighten voters, regardless of the truth, in
order to avoid taxation on the high profits
being earned in the for-profit part of the
health care system.
Lots of health care providers and insurers
in Oregon - including Kaiser, Providence
and Adventist - are nonprofits and their
taxes won’t be affected by Measure 97.
They’ll be happy that the state can insure
more people through the Oregon Health
Plan and invest in public health measures.
As for prescriptions, pharmaceutical
companies are national and international.
Overall, the firms affected by Measure 97
make only a fifth of 1 percent of their total
annual sales in Oregon. Our tax increase will
just slightly reduce their global profits.
High-earning corporations in every
industry should be contributing their fair
share to the public programs Oregonians
need that provide in-home care to seniors
and people living with disabilities.
Q: I f states more prosperous than Oregon
charge higher business taxes, what other
policies should we pursue to build a strong
economy?
Q: Big corporation ads call this a regressive
tax, but don’t they push for taxes targeted
especially on lower-income people?
A: Yes, the business lobby is being
completely hypocritical in their opposition
to Measure 97. They regularly lobby the
legislature to adopt regressive taxes, which
take a bigger bite out of the budgets of
lower income families than better off
households. The Oregon business lobby’s
idea of tax reform is a sales tax, which all
economists acknowledge is regressive.
Oregon now raises more revenue from
the lottery than from corporate income
taxes, though lotteries are notoriously
regressive, while corporate income taxes
are paid by the wealthy.
Q: Why would opposition TV ads say health
care bills will go up when nonprofits play such
A: The most important economic policies
we can enact are those that create the
physical and social infrastructure that allows
families and businesses to thrive. That
means investing in our schools, health,
social services and physical infrastructure.
Economies are strongest when the
highest proportion of people can participate,
because they have good health, good
educations and high quality, affordable care
for children, seniors and people living with
disabilities.
Businesses prefer that others pay for the
schools and infrastructure, but when firms
decide where to locate they’re looking for a
skilled workforce, good schools that help
recruit strong employees and an
environment in which their executives want
to live. That is what Measure 97 can help
us achieve.
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