Street Roots • July 13-19, 2018
Commentary
Page 11
The case against a constitutional ban on grocery industry taxes
F b ^hree massive grocery chains -
Mary C. King
Street S m art
Economics is a
periodic series
written by professors
emeriti in
economics fo r Street
Roots. M ary C.
K in g is a Professor
o f Economics
Emerita, Portland
State University.
together worth far more than the
X . entire Oregon economy - hope to
mislead Oregonians into voting for a
constitutional ban on taxes for the entire
grocery industry, including trucking and
distribution, by telling us it will help keep
food prices low.
They’ll tell us that what they oppose are
sales taxes on food.
Don’t believe them.
What they really want is to protect their
profits; - avoid paying for our schools,
public services and infrastructure; and keep
us from even thinking about taxing soda -
all in one fell swoop.
For a generation,
Oregonians have been
grappling with how to
adequately fund our
starving schools and
public services,
pinched by a decades-long decline in
corporate tax revenue. We need to figure
out how to raise business taxes, not lower
them, as Oregon’s business tax take is now
the second lowest in the country.
Just one state collects less revenue from
businesses than Oregon, according to the
pro-business Anderson Economic Group’s
recently updated ranking. Only in dark-red
Oklahoma do corporations contribute less.
And Oklahoma has so weakened its ability
td raise m oney th a t conditions in th e
Schools gaivaSized teach ers th ere to walk
off the job for nine days this spring,
demanding big increases in the education
budget.
Oregon progressives figured out that a
targeted “gross receipts” tax on the 1
percent of businesses could not be passed
on to customers, and so would be paid from
the profits of the world’s biggest, most
profitable corporations.
Gross receipts taxes are calculated as a
percentage of a company’s total sales in the
state or local area. Our state corporate
minimum tax is a gross receipts tax.
A targeted gross receipts tax, levied only
on the very largest businesses, can’t be
easily shifted to consumers by raising
prices; since their competitors won’t have
to pay i t That means it will have to be paid
from business profits.
Measure 97, which passed in Multnomah
County but ultimately failed statewide, was
designed to fund our schools and public
services with a targeted gross receipts tax
on the top 1 percent of corporations doing
business in Oregon. Now, the Portland Just
Energy Transition campaign has a measure
on the fall ballot for a targeted gross
receipts tax in Portland to fund a shift to a
greener, more inclusive city economy.
The mega-grocers want to stop us from
taxing their profits with a targeted gross
receipts tax by purposely confusing a
targeted gross receipts tax with a sales tax.
Sales taxes are well-known to be paid by
consumers, and to hit low-income people
harder than those with more money. So,
food is often exempted from sales taxes.
I t w on! help
hungry
Oregonians, only
major grocery
chains
Unlike targeted gross receipts taxes,
sales taxes are paid by consumers and take
a bigger bite out of the budgets of low-
income households than of more affluent
families.
Sales tax states like California generally
do not charge sales taxes on basic groceries
or prescription medicines. Sales tax states
do, however, tax prepared food, pet food and
all the non-grocery items that big chains
sell. They certainly do not exempt the entire
grocery industry from other taxes.
It’s easy to confuse people about targeted
gross receipts taxes, because they’re quite
different from more common general gross
receipts taxes. General gross receipts taxes,
levied on all businesses rather than on just
a small minority of businesses, do act like
sales taxes, inthat customers rather than
corporations usually have to pay them.
A general gross receipts tax applied to alb
Businesses a t th e sim ilar rates, works like a
sales tax, in that it’s generally paid by
consumers.
Targeted gross receipts taxes, only paid
by some businesses, can’t be accurately
analyzed with the big, simplified economic
models used by Oregon’s Legislative
Revenue Office and Portland State
University’s Northwest Economic Research
Center. Maybe worse, those models can’t
predict that a tax will be paid from profits,
because they builcfin the unrealistic
assumption that companies don’t have
profits after paying taxes and investors.
However, state and local taxes, other than
sales taxes on food, do not appear to affect
the local cost of food for consumers.
Our state and local taxes have virtually no
impact on our food prices. Oregon’s
business tax take is rock-bottom, but our
food prices are not low.
In fact, food prices hardly vary around the
country. The only regional differences that
exist are due primarily to differences in food
transportation costs.
Food prices are actually low by historical
standards. People aren’t hungry because
food costs too much; they’re hungry
because rents are so high.
People who study hunger say that the
problem is not the cost of food. Housing has
become so expensive that there’s no money
for food left at the end of the month, after
families have paid the big bills.
In 1900, American families spent nearly
half their budgets on food. Now, the big
items in family budgets are housing,
transportation, health care and child care -
and that doesn’t leave much for groceries.
Public investment in schools, health care,
housing and high quality care for
preschoolers, the elderly and
developmentally disabled adults is a far
more effective way to reduce poverty and
inequality than tax breaks for business.
High quality public housing, public
schooling from pre-school through
university, and care for those who need it
create opportunity, good jobs, and lower the
cost of living. The market can never provide
high quality services to low and moderate-
income people, because private sector firms
have to make money in the short term. The
government can invest for the long-term,
because public investments in people and
housing pay off handsomely, by helping
more people earn more over their lifetimes.
By contrast, tax breaks for big businesses
just line the pockets of
the wealthy.
Big grocery chains
always claim that
It's te rrib le p o lic y to p at w hat
theirs is a low profit
should ho the subject of
business, but we
le g is la tio n In to the constitu
should be skeptical.
tio n . The co n s titu tio n Is hard
Big grocery PR
to change because it's meant
flacks love to say that
lo
r Issues la rg e r tha n the tares
there’s no money to
p
a
id by one in d u stry. & consti
be made in grocery
stores, but enorm ous
tu tio n a l ban ties the hands of
o u r state le g isla to rs, and steals
corporations are
people's rig h ts to ta ilo r p o li
eagerly pushing their
way into the American cies to changing lo c a l
grocery business.
circumstances»
Amazon just bought
Whole Foods, and a
big German chain
called Lidl is opening
600 stores in the U.S.
It seems they believe they’ll earn good
money in the grocery business. And the
profits of U.S. corporations overall have
been at record levels for most of the past 15
years.
It’s terrible policy to put what should be
the subject of legislation into the
constitution.
The constitution is hard to change
because it’s meant for issues larger than the
taxes paid by one industry. A constitutional
ban ties the hands of our state legislators,
and steals people’s rights to tailor policies
to changing local circumstances.
Giant corporations would never spend a
cent on a ballot measure to protect low-
income people from having to pay higher
prices, even on life’s basic necessities.
By law, corporations’ sole purpose is to
make money for their shareholders. If giant
businesses are paying to tell you that they
can make someone else pay their taxes, you
have to assume that truth is the opposite,
that they can’t figure out a way to make
someone else pay their taxes.